Appeal details
Counselvise Citation
41824114 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
02-03-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Next Hearing Date
02-03-2015
Assessment Year
2010-2011
Appeal Filed On
10-12-2014
Judgement Text
1 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 NO. 33 /PNJ/2015 (ASST. YEAR : 20 1 0 - 1 1 ) ACIT, CENTRAL CIRCLE - 1 , BELGAUM. VS. M/S. S.B. MINERALS, NEAR SIDDIVINAYAKA TEMPLE, COMPOUNDER LANE, HOSPET . PAN NO. AAFFS 8188 L (APPELLANT) (RESPONDENT) ITA NO. 418/PNJ/201 4 (ASST. YEAR : 20 1 0 - 11 ) M/S. S.B. MINERALS, NEAR SIDDIVINAYAKA TEMPLE, COMPOUNDER LANE, HOSPET. VS. ACIT, CENTRAL CIRCLE - 1, BELGAUM. PAN NO. AAFFS 8188 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. UMAPATI AR DEPARTMENT BY : SHRI NATARAJ S . - D.R. DATE OF HEARING : 02 / 0 3 /2015 . DATE OF PRONOUNCEMENT : 0 2 / 0 3 /201 5 . O R D E R PER D.T. GARASIA , J .M 2 TH E S E TWO APPEAL S BY THE ASSESSEE AND THE DEPARTMENT ARE DIRECTED AGAINST THE ORDER OF LD. CIT (A) - VI , BANGALORE DATED 31 / 1 0/201 4 FOR THE A.Y. 20 1 0 - 1 1 . 2. FIRST WE WILL TAKE UP DEPARTMENTAL APPEAL IN I.T.A.NO. 33/PNJ/2015. THE FOLLOWING GROUNDS HAVE BEEN RAISED : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE FOREST DEVELOPMENT TAXES OF RS. 7 , 87,00,000/ - IN VIEW OF THE FACT THAT NO EVIDENCE WAS PRODUCED BY THE ASSESSEE FIRM BEFORE THE ASSESSING OFFICER IN THIS REGARD. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN GIVING RELIE F ABOVE WITHOUT APPRECIATING THE FACT THAT THE ISSUE OF FOREST DEVELOPMENT TAX WAS NEVER SUBJECT MATTER OF REMAND PROCEEDINGS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN GIVING THE RELIEF WITHOUT APPRECIATING THE FACT THAT THE SAID RELIEF WAS IN CONTRAVENTION TO THE PROVISIONS OF RULE 46A. 4. IT IS PRAYED THAT THE ISSUE MAY BE SET ASIDE TO THE ASSESSING OFFICER FOR FRESH EXAMINATION OF THE EVIDENCE IN THIS REGARD. 3. SHORT FACTS OF THE CASE ARE THAT ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 2010 - 11 ON 31/03/2012 DECLARING THEREIN INCOME OF RS. 9,21,99,256/ - . THE ASSESSEE FIRM IS CONSISTING OF EIGHT PARTNERS CARRYING ON BUSINESS OF TRADING OF IRON ORE. SRI SRINIVAS SINGH WHO WAS LOOKING AFTER THE ENTIRE B USINESS AFFAIRS OF THE FIRM , WAS EXPIRED ON 23/11/2011, HENCE THE ASSESSEE WAS NOT ABLE TO FILE THE RETURN OF 3 INCOME IN TIME AND OTHER PARTNERS WERE NOT AWARE OF THE ACCOUNTS AND WAS NOT ABLE TO TRACE WHERE THE INVOICES AND VOUCHERS WERE KEPT . ON GOING THROUGH THE P & L ACCOUNT, THE ASSESSEE HAS CLAIMED THE FOREST DEVELOPMENT TAXES OF RS. 20.87 CRORE . THE ASSESSING OFFICER DISALLOWED THE SAME. 4 . THE MATTER WAS CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED CLAIM OF RS. 7.87 CRORE BY OBSERVING AS UNDER: - IN MY VIEW, THEREFORE, A SUM OF RS. 7.87 CRORE BEING THE ACTUAL FOREST DEVELOPMENT TAXES PAID IS ALLOWABLE OVER AND ABOVE THE COST OF PRODUCTION ALLOWED BY THE ASSESSING OFFICER. APART FROM THESE EXPENSES CLAIMED AS FOREST DEVELOPMENT TAXES AND DEALT WITH ABOVE, THE APPELLANT HAS CLAIMED RS 26.01 CRORE AS MINES DEVELOPMENT AND DISCOUNT ALLOWED RS. 1.49 CRORE AS OTHER MAJOR EXPENSES. IT IS OBSERVED THAT MINES DEVELOPMENT CHARGES CLAIMED OF RS. 26.01 CRORE IS ONCE AGAIN PAID TO SRI B P ANAND KURRIAR, PARTNER OF ASSESSEE FIRM AND PROP, OF M/S VYSHNAVI MINERALS. VERACITY OF THESE CLAIMS HAS ALREADY BEEN DISCUSSED AT PARA NO. 10 ABOVE WHILE UPHOLDING THE REWORKING OF PROFIT. MOREOVER, THE ASSESSING OFFICER HAS ALREADY BROUGHT OUT THE DISCREPANCIES IN THIS REGARD. EVEN BY THE APPELLANT'S OWN ADMISSION, THIS EXPENDITURE PERTAINS TO A.Y. 2007 - 08 ONWARDS. NO EVIDENCE OF THE WORK CARRIED OUT IS AVAILABLE IN THE FORM OF DETAILS OF T RUCK NOS . ETC., IT IS ALSO ON RECORD THAT THE ENTIRE AMOUNT IS NOT DECLARED AS RECEIPT IN P&L A/C OF M/S VYSHNAVI MINERALS AS THE SERVICE TAX AMOUNT ALTHOUGH SHOWN BY THE APPELLANT M/S S B MINERALS AS PAID TO M/S VYSHNAVI MINERALS IS NOT DECLARED AS RECEIP T BY M/S VYSHNAVI MINERALS. UNDER CIRCUMSTANCES OF THE CASE, WHERE THE MAJOR PART OF THE SALES IS TO ANOTHER RELATED CONCERN RAM GOPAL MINERALS WHO IN TURN HAS SOLD TO M/S VYSHNAVI MINERALS, WHOSE PROP. SRI B P ANAND KUMAR, IS PARTNER IN BOTH M/S RAM GOPAL MINERALS AND THE APPELLANT FIRM, WHO IN TURN HAS SOLD THE IRON ORE TO OUTSIDE PARTIES AT 5 - 6 TIMES THE RATES SHOWN AS RECEIVED BY THE APPELLANT, THIS EXPENDITURE SHOWN CANNOT BE SUBSTANTIATED. 4 SIMILARLY, RS. 1.49 CRORE SHOWN AS DISCOUNT ALLOWED TO M/S RAM GOPAL MINERALS IS NOT SEPARATELY ALLOWABLE UNDER FACTS OF THE CASE. CONSIDERING THAT ? 322/ - PER M.T. AS THE COST OF PRODUCTION HAS BEEN ACCEPTED BY THE APPELLANT BEFORE IBM AUTHORITIES, THE SAME HAS RIGHTLY BEEN TAKEN INTO ACCOUNT IN DETERMINING THE TAXABLE INCOME. NO FURTHER ALLOWANCE OTHER THAN RS. 7.87 CRORE BEING THE FOREST DEVELOPMENT TAXES ACTUALLY PAID NEEDS TO BE MADE. 14. WITH THESE FINDINGS, THE APPEAL IS DECIDED AS PARTLY ALLOWED. THE APPELLANT GET S RELIEF OF RS. 23. 09. CRORE AT PARA 12 AND RS. 7.87 CRORE AT PARA 13 ABOVE. 5. LEARNED DR SUBMITTED BEFORE US THAT THE ASSESSEE HAS PAID THE FOREST DEVELOPMENT CHARGES AND HAS CHALLENGED FOR FOREST DEVELOPMENT CHARGES IN THE KARNATAKA HIGH COURT , WHICH IS PENDING . T HE HONBLE HIGH COURT HAS DIRECTED THE ASSESSEE TO PAY 50% FOREST DEVELOPMENT TAX AS AN INTERIM ARRANGEMENT PENDING DISPOSAL OF THE WRIT PETITION AND THE PETITIONS SHALL PAY 25% OF THE DEMAND IN CASH AND FURNISH BANK GUARANTEE FOR THE BALANC E 25%. THE ASSESSEE HAS PAID THIS AMOUNT AS PER THE DIRECTION OF HIGH COURT . THE AMOUNT IS NOT PAYABLE TO THE GOVERNMENT DURING THE YEAR UNDER CONSIDERATION , THEREFORE IT CANNOT BE ALLOWED. 6. ON THE OTHER HAND, LEARNED AR RELIED UPON THE ORDER OF LD. CIT(A). LEARNED AR SUBMITTED THAT THE FOREST DEVELOPMENT CHARGES ARE ALLOWABLE AS REVENUE EXPENDITURE AS HELD BY THE BOMBAY HIGH COURT IN 5 THE CASE OF CIT VS. DR. PRAFULLA R. HEDE AND ANOTHER IN TAX APPEAL NO. 15/2012 WHEREIN T HE HONBLE HIGH COURT HAS HELD THAT IF THE FOREST DEVELOPMENT CHARGES IS PAID TO FOREST, IT IS REVENUE EXPENDITURE. SIMILARLY, THIS JUDGMENT WAS ALSO CONFIRMED IN THE CASE OF DCIT VS. TIMBLO PVT. LTD. IN TAX APPEAL NO. 66/2012 , HENCE APPEAL MAY BE DISMISSED. 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN DR. PRAFULLA R. HEDES CASE (SUPRA) HAS HELD AS UNDER: - 5. THE ONLY QUESTION BEFORE THE TRIBUNAL WAS, WHETHER THE ASSESSMENT ORDER COULD BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND, THEREFORE , REQUIRED TO BE SET ASIDE IN THE REVISIONAL JURISDICTION? ON THE FACTS ADMITTED AND EMERGING FR OM THE RECORD, THE TRIBUNAL CONCLUDED THAT THE PAYMENT AS STATED IN TOWARDS THE LOSS OF FORESTRY ON THE FOREST LAND THAT HAS BEEN DIVERTED AND NO FOREST ASSET FOR THE ASSESSEE IS CREATED BY MAKING SUCH PAYMENT OF NET PROFIT VALUE. THE LAND IN FACT BELONGS TO A THIRD PARTY. THE ASSUMPTION ON WHICH THE COMMISSIONER OF INCOME TAX PROCEEDED IS WHOLLY ERRONEOUS. THE TRIBUNAL CONCLUDED THAT THE ORDER OF THE ASSESSING OFFICER WAS A POSSIBLE VIEW OF THE MATTER AND IN THE GIVEN FACTS AND CIRCUMSTANCES, COULD NOT HAVE BEEN SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, REQUIRING INTERFERENCE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 6. WITHOUT EXAMINING THE BROAD QUESTION AND THE CONTOUR OF THE POWERS CONFERRED ON THE REVISIONAL AUTHORITY, IN THE PRESENT FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDINGS OF THE APPELLATE 6 TRIBUNAL, PARTICULARLY IN PARAGRAPHS 13 TO 15 OF THE IMPUGNED ORDER ARE CONSISTENT WITH THE MATERIALS PLACED ON RECORD. WE AGREE WITH THEM AND WE ARE OF THE OPINION THAT THEY DO NOT GIVE RISE TO ANY QUESTION OF LAW, REQUIRING INTERFERENCE BY THIS COURT IN ITS APPELLATE POWERS. THE EXPENDITURE SO INCURRED IS FOR COMMERCIAL EXPEDIENCY AND SHOULD NOT BE TREATED AS EXPENDITURE OF CAPITAL NATURE. THE JUDGMENTS THAT THE TRIBUNAL HAS REFERRED TO ARE ON SIMILAR FACTS AND GIVEN IN SIMILAR CIRCUMSTANCES. WE DO NOT FIND ANY REASON TO INTERFERE WITH ITS CONCLUSION, AS NO QUESTION OF LAW ARISES FOR OUR DETERMINATION AND CONSIDERATION. 7. AFTER HEARING THE LEARNED COUNSEL APPEARING FOR THE DEPARTMENT, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS APPEAL AND IT IS, ACCORDINGLY, DISMISSED. THERE WILL BE NO ORDER AS TO COSTS. 8. WE ALSO FIND THAT THIS ISSUE WAS AGITATED BEFORE THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TIMBLO PVT LTD. (SUPRA) BY FOLLOWING THE SUBSTANTIAL QUESTION OF LAW : - E. WITHOUT PREJUDICE TO THE ABOVE, THE TRIBUNAL OUGHT TO HAVE ATLEAST HELD THAT THE ABOVE SAID EXPENDITURE INCURRED BY THE ASSESSEE SHOULD HAVE BEEN TREATED AS DEFERRED REVENUE EXPENDITURE TO BE ALLOWABLE ON PROPORTIONATE BASIS FOR THE ENTIRE PERIOD OF LEASE, AS THE LEASE DEED WITH THE STATE GOVERNMENT FOR MINING ACTIVITIES WAS FOR MORE THAN A YEAR AND THE COMPENSATION PAID TO THE FOREST DEPARTMENT TOWARDS AFFORESTATION IS A TIME FEE GIVING BENEFIT OF ENDURING NATURE IN THE FORM OF A RIGHT TO EXTRACT MINERALS OVER THE PERIOD OF LEASE. THE HONBLE HIGH COURT HAS REPLIED TO THE ABOVE QUESTION AS UNDER: - 7. THE ASSESSEE FOLLOWS THE MERCANTILE SYSTEM. IT ADMITTEDLY PAID THE AMOUNTS IN AS LUMP SUM DURING THE RELEVANT ASSESSMENT YEAR. THERE IS NOTHING TO INDICATE THAT THE PAYMENT WAS AN ADVANCE PAYMENT I N RESPECT 7 OF PAYMENTS SPREAD OVER THE DURATION OF THE MINING LE A SE. IN FACT, THE PAYMENTS WHICH WERE LIABLE TO BE MADE IN THIS RESPECT WERE IRRESPECTIVE OF THE PERIOD OF THE MINING LEASE. NOTHING TO THE CONTRARY HAS BEEN INDICATED. THE ISSUE RAISED IN PARAGRAPH 5(E) DOES NOT RAISE TO A SUBSTANTIAL QUESTION OF LAW. 9. THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE HAS HELD THAT IF ASSESSEE HAS PAID FOREST DEVELOPMENT CHARGES, THEN IT IS TO BE TREATED AS REVENUE EXPENDITURE. THE CONTROVERSY HERE IS THAT KARNATAKA GOVERNMENT HAS ISSUED A NOTIFICATION FOR FOREST DEVELOPMENT CHARGES, AGAINST WHICH ALL THE MINING OWNERS HAD FILED A WRIT PETITION BEFORE THE HONBLE HIGH COURT WHICH IS PENDING. BY INTERIM MEASURE, THE HONBLE HIGH COURT DIRECTED THE PE TITIONERS TO PAY 25% OF THE AMOUNT IN CASH AND TO FURNISH BANK GUARANTEE OF 25%. THE ASSESSEE HAD PAID THIS AMOUNT DURING THE YEAR. IF HE WANTED TO CARRY OUT THE MINING ACTIVITIES, THE ASSESSEE WAS DIRECTED TO PAY THESE CHARGES, HENCE, LD. CIT(A) HAS ALL OWED THE CLAIM OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. 10. IN ASSESSEES APPEAL I.E. I.T.A.NO. 418/PNJ/2014 , THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1.1 THE LEARNED CIT, APPEALS ERRED IN HOLDING THAT THE REWORKING OF PROFITS BY 'IN - EFFECT' REJECTING BOOKS OF ACCOUNTS / RESULTS AS IN ORDER, AS THERE IS NO SUCH APPLICATION OF SECTION 145 AND LAW - FULL 8 PROCEDURE FOLLOWED BY AO. THE REWORKING OF RESULTS WITHOUT FOLLOWING THE LEGAL PROCEDURE IS BAD IN LAW AND AMOUNTS TO TAMPERING OF ACCOUNTS OF THE ASSESSEE. 1.2 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT THE ASSESSING OFFICER ERRED IN CONCLUDING THE ASSESSMENT U/S 144 AGAINS T FACTS AND LAW OF THE CASE. 1.3 THE LEARNED CIT, APPEALS FAILS TO APPRECIATE THE PRINCIPALS OF BEST JUDGMENT ASSESSMENT HAVE NOT BEEN FOLLOWED BY AO. 2.1 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT THE FDT OF RS.20.87 CRORE IS ALLOWABLE SINCE THE LIABILITY IS ASCERTAINED IN THIS YEAR AND THAT THE ENTIRE AMOUNT HAS BEEN PAID IN THIS YEAR. 2.2 THE LEARNED CIT, APPEALS ERRED IN HOLDING THAT RS.13 CRORE HAS NOT BEEN PAID TOWARDS FDT, WHEN IT WAS ACTUALLY PAID THROUGH D.D'S TO FOREST DEPARTMENT. 3.1 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT RS. 26.01 CRORE BEING MINES DEVELOPMENT IS AN EXPENSES OF THE FIRM AND PAYMENT MADE TO THE PERSON WHO EXECUTED THE WORK THROUGH ANAND KUMAR IS ONLY A FUND ARRANGEMENT CONVENIENCE; THAT THE EXPENDITURE IS NOT CLAIMED BY AND HAS NO BEARING ON THE PROFIT OF B.P.ANAND KUMAR', THAT THE EXPENDITURE IS AN ESSENTIAL BUSINESS EXPENDITURE SUPPORTED BY APPROVED MINING PLAN. 4.1 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT THE DISCOUNT OF RS.14.9 CRORE IS AN EXPENSE FOR S.B. MINERALS AND IS AN INCOME FOR THE RECIPIENT RAMGOPAL MINERALS. 'THE ACTION OF LEARNED APPEALS HAS RESULTED IN DOUBLE TAXATION OF THE SAID A SUM OF RS.14.9 CRORES. ONCE IN THE HANDS OF S.B.MINERALS AND SECOND TIME IN THE HANDS OF RAMGOPAL MINERALS. THE DEPARTMENT (THE SAME AO) AS ALREADY ACCEPTED THE ACCOUNTS OF THE RAMGOPAL MINERALS WHERE THE DISCOUNT IS ADMITTED AS A RECEIPT. IT IS REQUIRED THAT THE EXPENDITURE CLAIMED IN THE HANDS OF S.B.MINERALS DESERVES TO BE ALLOWED. 5.1 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT WITHO U T ASSIGNING ANY REASON THE AO ERRED IN DISALLOWING THE CREDITORS TO THE EXTENT OF RS.600511 - 00. 5.2 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT THE AO ERRED IN NOT ALLOWING THE EXPENSES DEBITED TO P & L ACCOUNT, THOUGH INCURRING OF THE EXPENDITURE HAS NOT BEEN DENIED IN REMAND PROCEEDING. 6.1 THE LEARNED CIT, APP E ALS FAILED TO APPRECIATE THAT THERE IS NO UNDER VALUATION OF STOCK BY 31500 MTS WHEN THE SAME HAS BEEN INCLUDED IN THE TURNOVER. 9 7.1 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT THE AO SHOULD NOT HAVE TAKEN THE LETTER OF SRI. B.S.ASHOK S INGH AT ITS FAC E VALUE. 8.1 THE LEARNED CIT, APPEALS FAILED T APPRECIATE THAT THE AO HAS ERRED IN NOT CONSIDERING THAT DISPUTES BETWEEN PARTNERS REACHED HON'BLE HIGH COURT OF KARNATAKA. 9.1 THE LEARNED CIT, APPEALS FAILED TO APPRECIATE THAT THE AO ERRED IN CHARGING INTEREST U/S 234A ; 234B AND 234C OF THE ACT, WHEN THE APPELLANT WAS NOT OBLIGED TO PAY ANY SUCH INTEREST. THE APPELLANT SEEKS YOUR LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIME OF THE HEARING. 11. SHORT FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSINESS OF TRADING OF IRON ORE. THE ASSESSEE FIRM HAVE NOT BEEN AUDITED AND NO REP O RT IN FORM 3CB & 3CD HAS BEEN FILED. THE TURNOVER OF THE ASSESSEE FIRM WAS DISCLOSED IN THE INCOME WAS RS. 68.21 CRORE. THE ASSESSING OFFICER BROUGH T ON RECORD THAT THERE WAS DISC REPANCY WITH REGARD TO THE TOTAL PRODUCTION OF IRON ORE TO THE EXTENT OF RS. 31500 M.T. VA RIOUS EXPENSES CLAIMED FOR PRODUCTION LIKE MACHINERY HIRE CHARGES, RAISING CHARGES AND CERTAIN OTHER EXPENSES CLAIMED TO HAVE BEEN PAID , WERE POINTED OUT TO BE BOGUS BY THE SAID PARTNERS . THE ASSESSING OFFICER ALSO FOUND OUT THAT ASSESSEE HAS NOT DISCLOSED RS. 2.06 CRORE SALES , THEREFORE, HE WORKED OUT THE TOTAL TURNOVER OF THE ASSESSEE AT 68.21 CRORE. THE ASSESSING OFFICER DID NOT ALLOW ANY EXPENDITURE AND HE WAS OF THE VIEW THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IS BOGUS ONE I.E. MACHINERY HIRE CHARGES OF RS. 43,53,51,562/ - , MINES DEVELOPMENT RS. 26,01,31,775/ - AND DISCOUNT OF RS. 14,92,15,755/ - . 10 THEREFORE, THE ASSESSING OFFICER HAS VERIFIED THE P & L A/C AND FOUND THAT ASSESSEE HAS EXTRACTED THE IRON ORE FROM 03 LICENCE D MINES WHICH ARE AS UNDER: - 12 THE ASSESSING OFFICER, THUS, MADE THE ASSESSMENT BY OBSERVING AS UNDER: - 8. ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT ANNEXED TO THE RETURN OF INCOME IT IS SEEN THAT THE ASSESSEE HAS SHOWN A LOSS OF RS. 13,88,40,756 ON A TURNOVER OF RS.68,21,34,103. THE CREDIT SIDE ALSO REVEALS THAT THE ASSESSEE HAS RECEIVED INCOME OF RS.2,2 1,22,760 BEING REIMBURSEMENT OF VARIOUS EXPENSES AND CREDITORS AND AMOUNTS WRITTEN BACK. FURTHER IT IS ALSO SEEN THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN EXTRACTION OF IRON - ORE FROM 3 LICENSED MINES. THE DETAILS OF WHICH ARE AS UNDE R: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE DETAILS OF IRON - ORE EXTRACTED FROM THE VARIOUS MINES OF THE ASSESSEE WAS CALLED FOR FROM THE REGIONAL CONTROLLER OF MINES. THESE DETAILS WERE REQUISITIONED U/S 133(6) VIDE LETTER DATED 16.01.2012. THE REGIONAL CONTROLLER OF MINES HAS PROVIDED THE DETAILS OF IRON - ORE PRODUCED BY THE ASSESSEE DUR ING THE YEAR. AS PER THE DATA FURNISHED THE IRON ORE EXTRACTED BY THE ASSESSEE FROM THE VARIOUS MINES ARE REPORTED AS UNDER: MINE IRON - ORE EXTRACTED DURING THE YEAR ( IN MTS) RAMGAD MINES ML NO. 2393 1,52,000 MINE IRON - ORE EXTRACTED DURING THE YEAR (IN MTS) RAMGAD MINES ML NO. 2393 1,52,000 JAISINGHPUR MINES ML NO. 2550 1,41,500 VYSANKERI ML NO. 2515 10,68,500 MINE IRON - ORE EXTRACTED DURING THE YEAR (IN MTS) RAMGAD MINES ML NO. 2393 1,52,000 JAISINGHPUR MINES ML NO. 2550 1,10,000 VYSANKERI ML NO. 2515 10,68,500 11 JAISINGHPUR MINES ML NO. 2550 1,41,500 VYSANKERI ML NO. 2515 10,68,500 THUS FROM THE DETAILS OF IRON - ORE EXTRACTED AS SUBMITTED BY THE ASSESSEE AND THAT PROVIDED BY THE REGIONAL CONTROLLER OF MINES, IT IS SEEN THAT IN RESPECT OF MINE HAVING LICENSE NUMBER 2550, THE ASSESSEE HAS SHOWN LESS OUTPUT TO THE EXTENT OF 31,500 / - MTS OF IRON - ORE. FROM THE DETAILS AVAILABLE ON RECORD, THE ASSESSEE HAS SHOWN DISPATCH OF 10, 42 ,074 MTS OF IRON - ORE FOR A TOTAL CONSIDERATION OF RS. 68,21,34,103 WHICH WORKS OUT TO SALE PER METRIC TON OF RS. 655/ - . THUS THE ASSESSEE HAS CONCEALED TURN OVER ON ACCOUNT OF 31,500 / - MTS AMOUNTING TO RS. 2,06,32,500( 31,500*655). PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE INCOME - TAX ACT, 1961 INITIATED SEPARATELY. 9. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH RETURN OF INCOME, THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 8,65,90,924 ON ACCOUNT OF RAISING CHARGES, RS. 4,35,351,562 / - ON ACCOUNT OF MACHINERY HIRE CHARGES, RS. 6,37,717,165 / - ON ACCOUNT OF ADMINISTRATIV E AND OPERATIVE EXPENSES, APART FROM OTHER MINOR EXPENSES. AS MENTIONED SUPRA ON VARIOUS OCCASIONS NOTICES WERE ISSUED TO ALL THE PARTNERS UNDER SECTION 142(1) CALLING FOR EVIDENCES IN RESPECT OF THE EXPENSES CLAIMED, HOWEVER THERE WAS NO RESPONSE TO THE S AME. ON 24.01.2013, THE ESTRANGED PARTNER SRI. B S ASHOK SINGH, AND FILED LETTER DATED: 24.01.2013. IN THE SAID LETTER, HE HAS STATED THE FOLLOWING : ' THE MACHINERY HIRE CHARGES OF RS. 43,53,51,562/ - IS CONCERNED. IT IS COMPLETELY BOGUS CLAIM. ADMITTEDLY THERE ARE NO EMPLOYEES FOR THE PURPOSE OF CARRYING OUT THE MINING OPERATIONS AND THEREFORE THE HIRE OF MACHINERY DOES NOT ARISE. IN FACT THEY HAVE SUB - LET THE MINING LEASES TO THE THIRD PARTIES AND THEY HAVE NOT INCURRED ANY EXPENSES'. ' THE CLAIM REGARDIN G MAINTENANCE OF MINES AND MINES DEVELOPMENT IS CONCERNED, IT IS COMPLETELY INCORRECT AND A FALSE CLAIM MADE. AS PER THE NOTICE THEY HAVE DEBITED RS. 26,01,31,775/ - AS MINES DEVELOPMENT. ALL THE MINES - WERE FULLY DEVELOPED AND TO MY KNOWLEDGE THERE - WAS NO QUESTION OF INCURRING MINES DEVELOPMENT CHARGES OFRS. 26,01,31,775/ - AND THEREFORE THE SAID CLAIM IS FALSE AND BASELESS' ' THE DISCOUNT OF RS. 14,92,15,755/ - IS A BOGUS CLAIM MADE AND AS YOU MAY BE AWARE THAT IN IRON - ORE MINERAL THERE IS NO DISCOUNT AT ALL. THE 12 IRON - ORE MINERAL IS OF HIGH DEMAND AND NOBODY GIVES DISCOUNT. ON THE OTHER HAND PREMIUMS ARE ASKED, THEREFORE THE DISCOUNT OF RS. 14,92,15,75 5/ - IS COMPLETELY UNSUSTAINA BLE IN LAW AND FACTS' FURTHER SRI. B S ASHOK SINGH IN HIS LETTER HAS ALSO FURTHER MENTIONED AS UNDER: 'IN SO FAR AS CROP COMPENSATION IS CONCERNED THE SAID CLAIM IS FALSE. AS REFERRED TO EARLIER, THEY HAVE FILED ANNUAL REPORT BEFORE THE STATE GOVERNMENT AN D DEPUTY DIRECTOR OF MINES AND GEOLOGY ADMITTING THAT THE COST OF PRODUCTION IS LESS THAN RS. 322/ - WHICH IS INCLUSIVE ALL THE TAXES '. 10. SRI. B S ASHOK SINGH IS ONE AMONGST THE 8 PARTNERS OF THE ASSESSEE FIRM. INCIDENTALLY SRI. ASHOK SINGH HA D APPROACHED THE KARNATAKA HIGH COURT FOR APPOINTMENT OF ARBITRATOR TO ADJUDICATE THE VARIOUS DISPUTES BETWEEN HIM AND THE OTHER PARTNERS. THE HON'BLE HIGH COURT HAS SEEN MERIT IN THE PETITION AND ACCORDINGLY APPOINTED AN ARBITRATOR TO ADJUDICATE THE DI SPUTE. SINCE SRI. B S ASHOK SINGH CONTINUES TO THE PARTNER IN THE PARTNERSHIP FIRM THERE IS NO REASONS WHY HIS CONTENTION NOT BE TAKEN INTO ACCOUNT, THERE BEING NO CONTRARY SUBMISSION FROM THE ASSESSEE AND NO ONE FROM THE ASSESSEE FIRM IS COMING FORWARD TO EXPLAIN THE ASSESSEE'S CASE AND PRODUCE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS. AS THE PARTNER OF THE FIRM HAS ALREADY STATED AS PER PARA 9 ABOVE THAT THE TOTAL EXPENDITURE INCURRED BY THE FIRM IS ONLY RS. 3227 - PER MTS WHICH INCLUDES ALL THE TAXES AND THE RE IS NO EVIDENCE TO THE CONTRARY, THE TRADING ACCOUNT OF THE ASSESSEE IS REVISED AS UNDER: OPENING STOCK 9,11,90,100 SALES 68,21,34,103 COST OF PRODUCTION ( 13,30,500 MTS RS. 322) 42,84,21,000 CLOSING STOCK 41,04,98,673 COST OF PRODUCTION( NOT SHOWN IN RETURN 31,500*RS. 322) 1,01,43,000 SALES OUTSIDE THE BOOKS ( 31,500 MTS @ RS. 655/ - ) 2,06,32,500 NET PROFIT 58,35,11,176 1,11,32,65,276 1,11,32,65,276 13 13 THE MATTER WAS CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED THE CLAIM U/S. 40A(IA) OF THE ACT BY OBSERVING AS UNDER: - THE APPELLANT HA S CLAIMED THAT DISALLOWANCE OF RS. 23,09,26,862 / - U/S 40(A)(IA) BY THE ASSESSING OFFICER TO THE PROFITS COMPUTED AT RS. 58,35,11,176 / - AMOUNTS DOUBLE TAXATION AS THE SAME HAD ALREADY BEEN DISALLOWED BY THE APPELLANT. IN THIS REGARD, IT IS OBSERVED THAT THE APPELLANT IN RETURN OF INCOME HAD CLAIMED THAT RS. 23,09,26,862/ - CONSISTING OF RS. 9,90,65,725/ - TOWARDS MACHINERY HIR E CHARGES, 25,000/ - TOWARDS ADVERTISEMENT EXPENSES, RS. 5,61,0397 - TOWARDS ENVIRONMENT MONITORING CHARGES, RS. 61,7987 - TOWARDS SURVEY CHARGES, RS. 12,13,300/ - TOWARDS LEGAL FEES PAID AND RS. 13,00,00,000/ - TOWARDS FOREST DEVELOPMENT TAX IS NOT ALLOWABLE U/S 40(A)(IA) AND HAS BEEN ADDED BACK BY THE APPELLANT TO THE PROFIT DECLARED [OF RS. ( - ) 13,88,41,756/ - ] IN COMPUTING THE INCOME. AS THE ASSESSING OFFICER HAS IGNORED THE INCOME DECLARED BY THE APPELLANT AND WORKED OUT PROFIT SEPARATELY, THIS ARGUMENT O F THE APPELLANT THAT HE HAS ALREADY ADDED BACK THESE AMOUNTS IS NOT TENABLE. HOWEVER, CONSIDERING THAT THE ASSESSING OFFICER HAS REWORKED THE PROFITS OF THE APPELLANT BY 'IN EFFECT' REJECTING THE BOOKS/PROFITS OF THE APPELLANT AND TAKING INTO ACCOUNT COST OF PRODUCTION AS SHOWN BEFORE IBM AUTHORITIES, NO SEPARATE OR FURTHER DISALLOWANCE U/S 40A(IA) OR 40A(3) MAY BE NECESSARY. THIS ADDITION, THEREFORE IS DELETED [SUBJECT TO MY ORDER AT PARA NO.13 BELOW]. 14 THE ASSESSEE IS IN APPEA L BEFORE US FOR FOLLOWING CLAIMS : - 1. FOREST DEVELOPMENT TAX 13,00,00,000 2. MINES DEVELOPMENT EXPENSES 26,01,31,775 3. DISCOUNTS ALLOWED 14,92,15,755 4. SUNDRY CREDITORS 6,00,511 5. OTHER OPERATIVE AND ADMINISTRATIVE 14 EXPENSES 1,17,83,689 6. ADDITION OF STOCK OF 31500MTS 2,06,32,500 7. ROYALTY PAYMENT 8,48,20,248 8. FOREST PERMIT FEES 17,70,676 15 LD. AR SUBMITTED THAT ASSESSEE FOUND CONSISTING EIGHT PARTNERS CARRYING ON BUSINESS OF TRADING IRON ORE. MR. SRINIVAS SINGH WAS LOOKING AFTER ENTIRE AFFAIRS OF THE FIRM. HE EXPIRED ON 23/11/2011 HENCE ASSESSEE COULD NOT FILE THE RETURN AS OTHER PARTNERS WE RE NOT AWARE OF THE ACCOUNTS THEREFORE THE ACCOUNTS COULD NOT BE TRACED, THEREFORE RETURN WAS FILED BUT ASSESSEE WAS NOT ABLE TO AUDIT HIS ACCOUNTS. THE ASSESSING OFFICER HAS RECASTED TRADING ACCOUNTS AND HE HAS DETERMINED NET PROFIT OF RS. 58, 3511176/ - A ND FURTHER MADE ADDITION OF RS. 23, 0926862/ - FROM OTHER ADDITION. THE AO HAS MADE THE ASSESSMENT U/S 144 AND AO HAS MADE THE ASSESSMENT. THE AO HAS NOT MADE THE BEST ASSESSMENT JUDGMENT. THE AO DID NOT ALLOW ANY EXPENDITURE ON THE GROUND THAT ONE OF HIS P ARTNERS HAS APPEARED BEFORE AO AND SUBMITTED THAT ALL THE ACCOUNTS OF THE ASSESSEE ARE BOGUS ONE. THE ASSESSING OFFICER REJECTED THE RESULTS SHOWN AND WORKING OUT THE PROFITS. THE COST OF PRODUCTION DECLARED IN RETURN SUBMITTED TO INDIAN BEAURO OF MINES IN CLUDES ONLY CERTAIN ITEMS AND NOT THE ENTIRE EXPENDITURE OF THE BUSINESS. THE CIT (A) HAS NOT ALLOWED THE EXPENDITURE WHICH ARE SHOWN IN BOOKS OF ACCOUNTS AND WHICH WERE SUBJECT TO VERIFICATION BY AO IN 15 ABSENCE OF ANY AUDIT REPORT. THE AUDIT REPORT IN FORM NO. 3CB AND 3CD IS NOT CONCLUSIVE DOCUMENTS TO DETERMINE THE TAXABLE INCOME BY AO. THE ASSESSEE REQUIRES TO GET HIS ACCOUNTS AUDITED WHERE THE TURNOVER EXCEEDS CERTAIN LIMITS. THE AUDIT REPORT IS AN ADDITIONAL DOCUMENT TO FACILITATE TO VERIFICATION OF ACC OUNTS. THE AO HAS NOT MADE ASSESSMENT TO HIS BEST JUDGEMENT AND THE STANDARD PRINCIPLE ADOPTED IN SUCH CASES. THE AO IN HIS REMAND REPORT HAS NOT DETERMINED THE SPECIFIC ISSUE BUT ATTEMPTED TO POINT OUT CERTAIN DISCREPANCIES AND FAILED APPRECIATE THE RECON CILIATION AND THERE IS NO DETERMINATION OF FACTS OR ISSUE OF TOTAL INCOME IN THE REMAND REPORT. IN THIS LINE OF BUSINESS THE CONSIGNMENT TO CONSIGNMENT DEPENDS UPON FE CONTENT MAINLY AND SECONDLY THE RELEVANT MARKET CONDITION ON THAT DAY, THIRDLY THE REQUI REMENT OF FUNDS BY THE SELLER AND FOURTHLY THE RELATION BETWEEN THE SELLER AND BUYER. THE PRICES OF THE MARKET IS NOT GOVERN BY ANY FORCES THEREFORE THE RATES OF CONSIGNMENT IS DEPENDENT UPON MANY FACTORS. THE REAL AND MARKET PRICE OF CONSIGNMENT AND THEY HAVE NOT DISPUTED OR MADE VARIATION TO SALE PRICE. THE TOTAL TURNOVER DECLARED IS 68.21 CRORES IS NOT DISPUTED. THE ASSESSEE HAS MADE SALES TO HIS SISTER CONCERN AND THEY HAVE ALSO PAID THE TAXES. 16. THE ASSESSEE COULD NOT SUBMIT SOME BILLS BUT SALES LE DGER ACCOUNTS WAS PRESENTED AND IN WHICH COMPLETE DETAILS OF MISSING BILLS 16 HAVE BEEN DULY ACCOUNTED IN THE SALES. THERE ARE NO DISCREPANCIES IN ROYALTY EXPENSES AND FOREST DEVELOPMENT EXPENSES. THE COMPLETE PARTICULARS HAVE BEEN FURNISHED BEFORE AO. THE A O AND CIT (A) HAS NOT VERIFIED THE EXPENDITURE OF EXCAVATION OF IRON ORES, TRANSPORTATION, CRUSHING, SORTING, TRANSPORTATION AFTER SORTING, TRANSPORTATION OF WASTE MATERIALS, PAYMENT OF ROYALTY FEES, FOREST DEVELOPMENT EXPENSES ALL WERE MANAGED AND CARRIED OUT BY SISTER CONCERN FUNDS AND SAME HAVE BEEN REIMBURSED THROUGH SALE OF IRON ORES OWNED BY S. B. MINERALS. THE ONLY PURPOSE OF MOBILISING FUNDS AND MAKING PAYMENT FOR EXPENDITURE THE SISTER CONCERN WERE USED. THE ENTIRE EXPENDITURE IS INCURRED FOR PURPO SE OF EXTRACTION AND SALE OF IRON ORE WHICH BELONGS TO S. B. MINERALS. THE AO IS NOT JUSTIFIED IN NOT ALLOWING OPERATIVE EXPENSES AND FOREST DEVELOPMENT TAXES PAID DURING THE YEAR. THE FOREST DEVELOPMENT TAX IS A FRESH ISSUE RAISED BY FOREST DEPARTMENT WHI CH WAS NOT THERE IN EARLIER YEARS. IN YEAR 2008 THERE WAS FRESH INTERPRETATION BY FOREST DEPARTMENT AND MINE OWNERS HAVE TO PAY FBT. THE MATTER IS PENDING BEFORE KARNATAKA HIGH COURT AND ASSESSEE HAS PAID THE INTERIM FBT AS PER THE DIRECTION OF COURT. THE FIRST TIME DEMAND WAS RECEIVED IN A.Y. 2010 2011 THEREFORE DUE TO THIS PAYMENT THE PROFIT OF THE ASSESSEE WAS REDUCED INTO LOSS. THE ASSESSEE HAS PAID THIS FBT OF RS. 20.87 CRORES BY DEMAND DRAFT THEREFORE IT HAS TO BE ALLOWED. THE 17 ASSESSEE HAS ALSO INCU RRED THE EXPENDITURE OF 26.01 CRORES TOWARDS MINES DEVELOPMENT. IT IS TO BE ALLOWED. THE ASSESSEE HAS ALSO TO INCUR THE EXPENDITURE FOR REMOVING THE DUMP WASTE MATERIALS IN SPECIFIED SPACE AS PER MINING PLAN. THIS WASTE IS NOT SALEABLE AND HAS NO VALUE AN D IT IS TOTALLY WASTE. THE ASSESSEE HAS ACCOUNTED ONLY SALEABLE MATERIALS IN OPENING STOCK AND CLOSING STOCK THEREFORE THIS EXPENDITURE SHOULD BE ALLOWED. THE ASSESSEE HAS MADE PAYMENT OF REMOVING THESE MATERIALS WHICH IS NOT FOR ANY PROFIT BUT FOR FACILIT ATING THE BUSINESS. 17. THE ASSESSEE HAS MADE EXPENDITURE WHICH BELONGS TO S.B. MINERALS AND COMPLETE ACCOUNTS OF THESE EXPENDITURE WHICH WAS INCURRED BY SHRI B. P. ANAND KUMAR WHICH WAS PLACED FOR VERIFICATION. THE ASSESSEE HAS ALSO ALLOWED DISCOUNT TO RA MGOPAL MINERALS AND RAMGOPAL MINERALS HAS ALREADY ACCOUNTED THIS INCOME DISCOUNT IN HIS RETURN OF INCOME. THESE ARE THE FOLLOWING EXPENDITURE WHICH ARE ALLOWABLE WHICH READS AS UNDER: - 1. ROYALTY PAID RS. 73603748 - 00, 2. REPAIRS AND MAINTENANCE RS. 62682 6 - 00 3. OFFICE RENT RS. 86000 - 00, 4. POSTAGE RS. 2436 - 00, 5. LIGHT AND ELECTRICITY RS. 2500 - 00 6. PROFESSIONAL TAX RS. 22007 - 00, 7. SALARY RS. 490040 - 00, 18 8. LEGAL FEES RS. 15000 - 00 9. RATES AND TAXES, 10. TRAVELLING AND CONVEYANCE, 11. ACCIDENTAL COMP ENSATION 12. STAFF AND LABOUR WELFARE. ALL THESE EXPENSES ARE BUSINESS EXPENDITURE AND INCURRED DURING THE COURSE OF BUSINESS , THEREFORE , IT MAY BE ALLOWED. DURING THE COURSE OF HEARING LD. AR HAS FILED THE SYNOPSES WHICH READ AS UNDER: - REASONS FOR VARI ATION IN PROFIT IN YEAR AFTER YEAR: 1. THE PROCESS OF EXTRACTION DEPENDS UPON THE NATURE OF EARTH. 2. SOMETIMES THE WASTAGE WILL BE HUGE AND THERE MAY BE WALL BOULDERS TO BE REMOVED WHICH WILL INCREASE THE COST OF EXTRACTION (MACHINERY HIRE CHARGES IN THE ACCOUNTS) AND SOMETIMES THERE WILL BE SMOOTH EXTRACTION WITH LESS WASTAGE. THIS ASPECT IS UNPREDICTABLE AND CHANGES FROM YEAR TO YEAR AND MINE TO MINE. 3. IN THE A.Y.2010 - 11 FDT IS A NEW LEVY AND MINES DEVELOPMENT WAS INCURRED AFTER THREE YEARS. IF THESE ITEMS ARE TAKEN INTO CONSIDERATION THE NET LOSS OF 13.89 CRORES GETS CONVERTED TO PROFIT OF RS.33.00 CRORES AND THE PERCENTAGE OF PROFIT WORKS OUT TO 48%. ENCLOSED DETAILS OF EXTRACTION EXPENSES PER METRIC TON PAGE NO 108 TO 109 RECONCILIATION OF ST OCK: THE ASSESSING OFFICER OBSERVED THAT THERE IS SUPPRESSION OF STOCK BY 31500 MT A DETAILED CHART HAS BEEN FURNISHED WHEREIN IT IS SHOWN THAT THIS IS ONLY A CLERICAL MISTAKE WHERE ONE ACCOUNTANT MADE TYPING MISTAKE BY REDUCING BOTH PRODUCTION AND DESPATCH BY 31500 MT. THE COMPLETE DETAILS OF PARTY WISE, QUANTITY WISE SALES HAS BEEN FURNISHED WHICH ESTABLISHES THAT THE SALES AND CLOSING STOCK HAVE BEEN CORRECTLY ARRIVED AT. THERE IS NO SUPPRESSION OF SALE OR CLOSING STOCK. 19 ENCLOSED DETAILED CHART OF RECONCILIATION AND ITEM WISE SALES AT PAGE NO 110 TO 111 FDT: THIS IS A NEW EXPENDITURE CONSEQUENT ON NEW LEVY BY THE GOVERNMENT. ON RECEIPT OF DEMAND NOTICES FROM FOREST DEPARTMENT A TOTAL SUM OF RS.20.87 CRORES WAS PAID DURING THE RELEVANT PREVIOUS YEAR THROUGH BANK DEMAND DRAFTS. THIS EXPENDITURE IS CLAIMED IN THE A.Y.2010 - 11 AND AS PER THE SECTION 43B OF INCOME TAX ACT, CAN BE AND HAS TO BE ALLOWED ONLY IN THIS YEAR. THE EVIDENCE OF PAYMENT OF COMPLETE BANK DEMAND DRAFTS WERE FURNISHED TO THE AO AND LE ARNED CIT APPEALS, IT IS NOT UNDERSTANDABLE HOW LEARNED CIT APPEALS HELD THAT, PAYMENT PROOF IS THERE ONLY FOR 07.87 CRORES, NOW WE ARE AGAIN SUBMITTING COMPLETE DEMAND DRAFTS TOTALLING TO RS.20.87 CRORES BEFORE THE HONOURABLE ITAT, WITH A REQUEST TO ALLOW THE CLAIM U/S 43 B. ENCLOSED BANK DEMAND DRAFT COPIES PAGE NO 112 TO 136 MINES DEVELOPMENT: AS PER IBM RETURNS FILED REGULARLY THE TOTAL WASTAGE GENERATED DURING THE PREVIOUS RELEVANT TO A.Y.2008 - 09,2009 - 10,2010 - 11 IS 39,94,138 MT OUT OF WHICH ONLY 19 LAC TONS HAS BEEN TRANSPORTED TO MAKE SPACE FOR FURTHER MINING AND CRUSHING AREA. THE ASSESSING OFFICER CALLED FOR RETURN OF INCOME OF THE TRANSPORTER M/S VIJAY MINING & INFRA LTD AND VERIFIED THAT THE PAYMENTS HAVE BEEN DECLARED BY THEM IN THEIR RETURN OF INCOME, AS STATED IN HIS REMAND REPORT. SUBMITTED THAT THE ENTIRE PAYMENT HAS BEEN MADE BEFORE THE END OF THE ACCOUNTING YEAR AND THERE WAS NO MONEY PAYABLE AS ON LAST DAY OF THE ACCO UNTING YEAR, REQUEST FOR KIND APPLICATION OF HONOURABLE ALLAHABAD HIGH COURT DECISION (DEPARTMENT APPEAL DISMISSED BY HONOURABLE SUPREME COURT) IN THE CASE OF CIT V/S VECTOR SHIPPING SERVICES, WHERE IT IS HELD THAT DISALLOWANCE OF EXPENDITURE FOR NON - TDS C AN BE MADE ONLY IF THE EXPENDITURE WAS OUTSTANDING AS PAYABLE AT THE END OF THE YEAR . ENCLOSED COPIES OF IBM ANNUAL RETURNS & EXTRACT OF AO'S REMAND REPORT PAGE NO 137 TO 145 DISCOUNT : TOTAL SALES FROM SBM TO RGM SALE ON WHICH DISCOUNT ALLOWED PURCHASE VALUE OF RGM SALES REALISED BY RGM PROFIT DERIVED RGM PROFIT PERTON FINES : 6,41,374 TONS 3,01,770 TONS 24.44 CRORES 24.89 CRORES 0.45 CRORE 15/ - LUMPS : 4,00,697 TONS 1,39,167 TONS 13.08 CRORES 13.36 CRORES 0.28 CRORE 20/ - TOTAL 10,42,071 TONS 4,40,937 TONS SALES ON WHICH NO DISCOUNT WAS ALLOWED 6,01,134 TONS : 20 OUT OF TOTAL SALES MADE TO RGM OF 10, 42,071 TONS RGM CLAIMED THAT THE PROFIT MARGIN IN CASE OF 4,40,937 TONS WAS VERY LOW AT RS.15/ FINES AND RS.20/ - FOR LUMPS, ON ACCOUNT OF HIGHER SALE PRICE CHARGED BY SBM WHERE AS IN RESPECT OF 6,01,134 TONS THE AVERAG E PROFIT MARGIN IS RS.380/ PER TON AND THEY INSISTED FOR HEAVY DISCOUNT. ON THIS BASIS RGM CLAIMED HEAVY DISCOUNT ON THE SUPPLIES MADE BY US IN RESPECT OF 4,40,937 TONS. CONSIDERING THIS IT WAS DECIDED TO ALLOW DISCOUNT OF RS.300/ - IN RESPECT OF FINES, AND RS.400/ - IN RESPECT OF LUMPS (AVG.RS.350/ - ) AND ACCORDINGLY IT WAS ALLOWED ONLY ON THAT QUANTITY. ENCLOSED DETAILED STATEMENTS PAGE NO 146 TO 149 ROYALTY & FOREST PERMIT: THE AO CONSIDERED THE SALES AT 68.21 CRORES AS DECLARED IN THE RETURN; ALLOWED COST O F PRODUCTION AT 42.84 CRORES WHICH IS ALL MOST NEAR TO 43.53 CRORES (SCHEDULE - G OF P&L) DECLARED IN THE RETURN. THIS EXPENDITURE IS EXCLUSIVE OF ROYALTY AS IS EVIDENT FROM THE RETURN OF INCOME; THEREFORE, THE ROYALTY AND FOREST PERMIT UNDER (SCHEDULE F OF P&L ACCOUNT, RAISING CHARGES) AMOUNT TO RS.8.65 CRORES HAS TO BE ALLOWED. AS THIS IS THE PAYMENT MADE TO THE GOVERNMENT OF KARNATAKA EVIDENCED BY DEMAND DRAFTS DRAWN IN FAVOUR OF DIRECTOR OF MINES & GEOLOGY, THE EXPENDITURE HAS TO BE ALLOWED AS IT IS PRE R EQUISITE FOR ANY SALE WITHOUT THIS EXPENDITURE THE SALE COULD NOT HAVE BEEN MADE. ENCLOSED XEROX COPIES OF DEMAND DRAFTS PAGE NO 150 TO 220 OTHER EXPENDITURES: THE OTHER ROUTINE EXPENDITURES OF PURCHASES 0.06 CRORES SCHEDULE E; REPAIRS & MAINTENANCE RS.0.12 CRORES; ADMINISTRATIVE & OPERATIVE EXPENSES (EXCLUDING FDT; MINES DEVELOPMENT & DISCOUNT AMOUNTING TO 61.78 CRORES SEPARATELY DISCUSSED ABOVE) RS.1.99 CRORES SCHEDULE I, DEPRECIATION 0.09 CRORES SCHEDULE K HAS TO BE ALLOWED AS THEY ARE ROUTINE EXPENSES INCURRED AND FULLY SUPPORTED. BILLS AND VOUCHER AND EVIDENCE OF PAYMENTS HAVE BEEN PRODUCED BEFORE LEARNED AO AND LEARNED CIT APPEALS. THERE IS NO SPECIFIC ORDER ON THESE ISSUES. ENCLOSED STATEMENT 221 TO 221 DISALLOWABLE U/S 37; 43B, & 4 0(A) (IA): THE TOTAL DISALLOWABLE UNDER THESE SECTIONS COMES TO RS.10,10,41,012/ - , THIS IS TO BE CONSIDERED FOR THE COMPUTATION OF INCOME. ENCLOSED DETAILS 222 TO 222. 21 18. DURING THE COURSE OF HEARING LD. AR SUBMITTED THAT IN ASSESSMENT YEAR 2008 - 09 THE TOTAL SALES WAS 3 2 .18 CRORES AND THE NET PROFIT WAS AFTER INCURRING ALL EXPENSES 5.34 %. IN A.Y. 2009 - 10 THE SALES WAS 79.74% AND THE NET PROFIT WAS 0.5 6 %. IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE TOTAL SALE IS 68.21 CRORES AND AS PER THE AO THE N ET PROFIT WOULD BE 16.75% WHICH IS ON HIGHER SIDE. THE LD AR SUBMITTED IF ASSESSEE HAS NOT TO PAY 20.87 CRORES FOREST DEVELOPMENT CHARGES AND IF THIS CHARGES ARE SPREAD OVER FOR 3 YEARS THEN THE PROFIT MARGIN IN A.Y. 2008 - 09 WOULD BE LOSS OF 5.46 CRORES AND A.Y. 2009 - 10 THE PROFIT SHOULD HAVE BEEN - 22.99% THEREFORE ASSESSEE HAS PAID FBT CHARGES IN THE YEAR UNDER CONSIDERATION THEREFORE THE ASSESSMENT TURNED INTO LOSSES RS. 13.89 CRORES. THE LD. AR SUBMITTED THAT THE APPEALS OF THE ASSESSEE MAY BE ALLOWED IN FULL. 19. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER OF REVENUE AUTHORITIES. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS TURNOVER OF 68.21 CRORES. THE AO HAS CALLED SHRI B. S. DEEPAK DURING REMAND PROCEEDINGS. DURING THE YEAR THE ASSESSEE HAS SHOWN THE SALES OF 68.21 CRORES INVOLVING IRON ORE FINES AND THE SALE OF IRON ORE COMES TO RS. 517.5 MT. THE IRON ORE SOLD TO HIS SISTER CONCERN AT RS. 3.25 PER MT I.E. ARBITRARY SALES. THE ASSESSEE HAS INCURRED VARIOUS EXPENSES LIKE 22 HANDLING CHARGES AND HE HAS INCURRED THE EXPENDITURE FOR REMOVING THE WASTE OF IRON ORE. THE WASTE OF IRON ORE IS NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS. THE AO HAS ALSO BROUGHT THE QUANTITY PRODUCED BY THE ASSESSEE AND WHICH WAS SUBMITTED TO IBM AUTHORITIES THEREFORE WHEN NO AUDIT ACCOUNT ARE SUBMITTED AND THE SALES ARE ARBITRARY RATES TO HIS SISTER CONCERN THEREFORE THE BOOKS OF THE ACCOUNTS IS REJECTED AND CIT (A) IS JUSTIFIED IN HIS ACTION. 20. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCU MSTANCES OF THE CASE, WE FIND THAT IN THIS CASE THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING HIS INCOME AT RS. 9,21,99,256/ - . AFTER FILING THE RETURN, THE ASSESSEE WAS GIVEN NOTICE U/S. 142(1) OF THE ACT THEREAFTER NOTICE U/S. 142(2) OF THE ACT DATED 27/09/2012 WAS SERVED TO THE ASSESSEE. THE THREE MAJOR EXPENSES I.E. MACHINERY HIRE CHARGES, MINING DEVELOPMENT, DISCOUNT, FOR WHICH THE ASSESSING OFFICER WAN TED TO VERIFY THE CLAIM OF THE ASSESSEE. IN THIS CASE, THE ASSESSING OFFICER HELD THAT ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN AUDITED AND REPORT IN FORM 3CB AND 3CD WAS NOT FILED . THE ASSESSEE WAS IMPOSED PENALTY U/S. 271 B OF THE ACT FOR NOT GETTING HIS ACCOUNTS AUDITED. THE ASSESSING OFFICER HAS VERIFIED THE P & L ACCOUNT . I N THE MEANTIME , ONE 23 SHRI B.S. ASHOK SINGH HAS FILED A LETTER MENTIONING THAT ALL THE ACCOUNTS ARE BOGUS AND FOLLOWING THIS LETTER, THE ASSESSING OFFICER HAS VERIFIED THE CLOSING STOCK AND SALES OF THE ASSESSEE AND ARRIVED AT CONCLUSION THAT ASSESSEE MADE SALES OF RS. 68,21,34,103/ - . THE MATTER WAS CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER . DURING THE REMAND PROCEEDINGS, THE ASSESSEE HAS GIVEN SOME OF THE EVIDENCE AND SUBMITTED THE DETAILS BEFORE THE IBM AUTHORITIES FOR HOW MUCH MINING PRODUCTION WAS CARRIED OUT AND ASSESSEE HAS ALSO SHOWN THE PRODUCTION OF MINING IN HIS P & L A/C . AFTER CON SIDERING THIS, LD. CIT(A) HA S HELD THAT THE MINING DEVELOPMENT EXPENSES OF RS. 26. 01 CRORES HAS NOT BEEN EXPLAINED, MOREOVER LD. CIT(A) HAS DELETED THE ADDITION OF RS. 23.09 CRORES MADE U/S. 40(A)(IA) OF THE ACT. THE LD. CIT(A) HAS ALLOWED THE FOREST DEVELOPMENT CHARGES OF RS. 7.87 CRORES . 21 . BEFORE US, THE QUESTION COMES WHETHER THE ASSESSEE HAS GIVEN ALL THE EVIDENCE WHICH ARE AS PER THE LD. CIT(A) IS NOT RELIABLE . WHEN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE, THE BEST OPTION FOR THE ASSESSING OFFICER TO MAKE THE ASSESSMENT BEST JUDGE ASSESSMENT. THIS TYPE OF ASSESSMENT IS MADE IN THE ABSENCE OF SUFFICIENT INFORMATION , THE ASSESSING OFFICER HAS TO G UESS THE INCOME TO HIS BEST 24 ABILITY , KNOWLEDGE, GUESS WORK . THIS ASSESSMENT IS NOT TO PUNISH THE ASSESSEE TO MAKE ASSESSMENT ON THE BASIS OF INFORMATION AND MATERIAL GIVEN BY THE ASSESSEE. THE ASSESSMENT U/S. 144 OF THE ACT IS QUASI JUDICIAL PROCESS AND QUASI JUDICIAL PROCESS REQUIRE S THAT BEFORE ARRIVING THE DECISION, THE ASSESSEE MUST BE GIVEN OPPORTUNITY . WE FIND THAT ASSESSEES CLAIM IS NOT RELIABLE. IN OUR OPINION, THE BEST OPTION FOR THE ASSESSING OFFIC ER TO ESTIMATE THE INCOME OF THE ASSESSEE. WE FIND THAT THE FOREST DEVELOPMENT EXPENSES WHICH ARE PAID TO THE GOVERNMENT, THOSE EXPENSES ARE ALLOWABLE. THE ASSESSEE HAS DONE HIS BUSINESS AND AS PER THE ASSESSING OFFICER RECORD, THE ASSESSEE HAS MADE SALE OF RS. 68,21,34,103/ - . THE ASSESSEE HAS ALSO SUBMITTED THE HISTORY OF HIS NET PROFIT IN A.Y. 2008 - 09 AT 5.34% AND IN A.Y. 2009 - 10, NET PROFIT WAS AT 0.56%. IN THESE BOTH YEARS, THE BOOKS OF ACCOUNTS WERE AUDITED AND THE ASSESSMENT WAS ALSO SCRUTINIZED. WE FIND THAT ONE HAS TO GUESS THE INCOME OF THE ASSESSEE. THE BEST JUDGMENT ASSESSMENT IS POSSIBLE TO ASSESS THE INCOME ON THE BASIS OF PAST RECORDS. WE FIND THAT THE ASSESSEE IS ENGAGED IN ELIGIBLE BUSINESS . A SUM OF 8% O F TOTAL TURNOVER OF SUCH BUSINESS IS DEEMED NET PROFIT OF THE BUSINESS, WHICH IS CHARGEABLE UNDER THE HEAD PROFIT AND GAIN . WHILE ESTIMATING THE NET PROFIT , WE FIND THAT ASSESSEE DEE ME D TO HAVE ALREADY GIVEN FULL EFFECT AND FURTHER DEDUCTION SHALL NOT BE ALLOWED. I N THE INTEREST OF JUSTICE 25 AND FAIR PLAY , WE ARE OF THE VIEW THAT WHEN ASSESSEES CLAIM IS NOT FOUND TO BE GENUINE AS PER THE ASSESSING OFFICER AND LD. CIT(A) , WE THEREFORE , DIRECT THE ASSESSING OFFICER TO TAKE THE INCOME OF THE ASSESSEE ON TOTAL TURNOVER. THE ASSESSING OFFICER AND LD. CIT(A) IN THEIR ORDER HAS NOT DISPUTED THAT ASSESSEES SALES TURNOVER IS RS. 68,21,34,103/ - . THEREFORE , WE ESTIMATE THE NET PROFIT @ 8% ON THE TOTAL SALES OF THE ASSESSEE. 22. IN THE RES ULT, APPEAL OF THE DEPARTMENT IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED AS STATED ABOVE . ( ORDER PRONOUNCED IN THE OPEN COURT ON 0 2 N D MARCH , 201 5 ). S D / - S D / - (P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 7 T H A P R I L , 201 5 . VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD. CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI .
