MGM Minerals Limited, Bhubaneswar V. JCIT, Bhubaneswar

ITA 420/CTK/2015

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0589 (ITAT-CUTTACK)
• Duration Of Justice: 6 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; TDS; Set aside
• Section: 37; 142(1); 115JB; 40(a)(ia); 143(2)

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ, कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI MANISH BORAD, AM आयकर अपीऱ सं./ITA No.420/CTK/2015 (नििाारण वषा / Assessment Year :2010-2011) MGM Minerals Limited 2-A, Forest Park Bhubaneswar-751009 Vs JCIT-Range-1, Bhubaneswar PAN No. : AADCM2818E (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) आयकर अपीऱ सं./ITA No.408/CTK/2015 (नििाारण वषा / Assessment Year :2010-2011) DCIT-Circle 2(1), Bhubaneswar Vs MGM Minerals Limited 2-A, Forest Park Bhubaneswar-751009 PAN No. : AADCM2818E (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) CO.No.55/CTK/2015 (Arising out of ITANo.408/CTK/2015) (नििाारण वषा / Assessment Year :2010-2011) MGM Minerals Limited 2-A, Forest Park Bhubaneswar-751009 Vs JCIT-Range-1, Bhubaneswar PAN No. : AADCM2818E (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) आयकर अपीऱ सं./ITA No.278/CTK/2017 (नििाारण वषा / Assessment Year : 2012-13) MGM Minerals Limited 2-A, Forest Park Bhubaneswar-751009 Vs JCIT-Range-1, Bhubaneswar PAN No. : AADCM2818E (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) ITA No.420& others /CTK/2015 MGM Mineral Ltd. 2 आयकर अपीऱ सं./ITA No.242/CTK/2017 (नििाारण वषा / Assessment Year : 2012-13) DCIT-Circle 2(1), Bhubaneswar Vs MGM Minerals Limited 2-A, Forest Park Bhubaneswar-751009 PAN No. : AADCM2818E (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) CO. No.04/CTK/2018 (Arising out of ITANo.242/CTK/2017) (नििाारण वषा / Assessment Year : 2012-13) MGM Minerals Limited 2-A, Forest Park Bhubaneswar-751009 Vs JCIT-Range-1, Bhubaneswar PAN No. : AADCM2818E (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) ननधाारिती की ओर से /Assessee by : Shri B.K. Mahapatra & A.K. Sobat, ARs िाजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR स ु नवाई की तािीख / Date of Hearing : 28/10/2021 घोषणा की तािीख/Date of Pronouncement : 05/01/2022 आदेश / O R D E R Per Bench: The captioned appeals filed at the instance of assessee & Revenue are directed against the order passed by the Ld. CIT(A), Bhubaneswar, dated 02.07.2015 & 10.03.2017 for the assessment year 2010-2011 & 2012-13. 2. As the issues raised in these appeals are common and relate to same assessee, at the request of all the parties all the appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. ITA No.420& others /CTK/2015 MGM Mineral Ltd. 3 2. The assessee has raised the following grounds of appeal in ITANo. 420/CTK/2015 for A.Y.2010-11:- 1.That the order dated 02.07.2015 passed by the Learned Commissioner of Income Tax (Appeals) [in short "CIT(Appeals)"], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Addition under "Creditors & Advances- Rs.1 ,20,36,869 a.That the learned ClT(Appeals) has mis-appreciated/misconstrued the facts and his confirming the addition of Rs.1 20,36,869/- under "Creditors & Advances" in respect of the following: i. Castrol India Ltd. Rs. 9,19.022 ii. I firalal Agency Pv1. Ltd. Rs.24,99.894 iii.Ganesh Sales Corporation Rs.35,00,000 iv. Maa Samleswario Sponge Iron Ltd. Rs.15,39.480 v. Rabindra Kumar Agarwal Rs.31,50,000 vi. Maa Tarini Industries Ltd. Rs. 4,28,473 is, unjustified, arbitrary, erroneous, and bad, both in the eye of law and on facts. b. That the assessee having discharged its onus in respect of the above said Rs. 1 ,20,36,869/- by furnishing the details, particulars, documents and information, both the learned AO as well as the CIT(Appeals) has grossly erred in holding that the assessee has failed to furnish the details. c. That without prejudice to the Grounds (a) & (b) above, the aforesaid Rs.! ,20,36,869/being the closing balance of the aforesaid Party Accounts the additions made by the learned Assessing Officer as income of the assessee and confirming the addition of the same Rs.l,20,36,869/- by the learned CIT(Appeals) is contrary to facts, arbitrary, unjustified, erroneous, bad in law and legally untenable. 3.Addition/ Disallowances under 'Peripheral Development Expenses' - Rs.17,23,676/- a.That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in confirming the addition/disallowance of Rs.17,23,676/- under 'Peripheral Development Expenses' is based on irrelevant considerations, presumptions, conjectures and surmises, contrary to facts, arbitrary, excessive, erroneous and bad in law. b.That the learned CIT (Appeals) in holding that the aforesaid Rs.l7,23,676/- under 'Peripheral Development Expenses' is not justified in terms of business necessity spent in connection with running of business and not in terms with Govt. of Odisha notification is on mis-appreciation or facts, based on irrelevant considerations arbitrary, erroneous and bad. both in the eye of law and on facts. c.That the aforesaid Rs.17,23,676/- under 'Peripheral Development Expenses' is incurred by the assessee wholly and exclusively for the purpose of its business and on the facts and in the circumstances ITA No.420& others /CTK/2015 MGM Mineral Ltd. 4 the case, the confirmation of disallowance of the said Rs.17,23,676/- is on mis-appreciation of /contrary to facts, arbitrary, erroneous and bad in law. d.That That on the facts and in the circumstances the case, the Learned ClT(Appeals) ought to have allowed the aforesaid Rs.17.23,676/-. which are incurred wholly and exclusively Cor the purpose of business of the asessee. 4.Addition/ Disallowances under 'Afforestation'- Rs4O,OOO/- a.That on the facts and in the circumstances the case, the order of the learned Commissioner of Income Tax (Appeals) in confirming the addition/disallowance of Rs.40,OOO/- under 'Afforestation' contrary to facts arbitrary, excessive, erroneous and bad, both in the eye of law and on facts. b.That the aforesaid Rs.40,OOO/- under 'Afforestation' is incurred by the assessee wholly and exclusively for the purpose of its business, the confirmation of the disallowance of the same is on mis- appreciation of facts. arbitrary, erroneous and bad both on facts and in law. c.That the aforesaid Rs.40,OOOI- having been paid to the Govt. Department towards 'Afforestation', the Learned ClT(Appeals) ought to have Cully allowed the same. 5. Addition/disallowances under u/s 40(a)(ia) of the Act in respect of i. Advertisement & Publicity-Rs.9,54,500/- ii. Rent Rs.7,09,476/- That on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have deleted the addition/disallowance u/s 40(a)(ia) of the Act in respect of i. Advertisement & Publicity-Rs.9,54,500/- ii. Rent Rs.7,09,476/- instead of directing the matter to the Ld. AO. The Revenue has raised the following grounds of appeal in ITANo. 408/CTK/2015 for A.Y.2010-11 1.On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as in facts in deleting the addition of Rs.5,43,68,495/- made by the AO on account of difference in closing stock valuation. 2.On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as in facts in deleting the addition of Rs.6,28,01 ,8261 - made by the AO on account of sundry debtors. 3.On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as in facts in deleting the addition of Rs.9,53,571/- made by the AO on account of drilling and blasting expenses. 4.On the facts and in the circumstances of the case, the Ld. CIT (A) is not justified in law as well as in facts in deleting the addition of Rs.1 ITA No.420& others /CTK/2015 MGM Mineral Ltd. 5 ,62,0001 - made by the AO on account of charity and donation. 5.The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. The Assessee has raised the following grounds of appeal in CO.No. 55/CTK/2015 for A.Y.2010-11 1.That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) ("CIT (Appeals)") is legally correct and fully justified, both on facts and in law, in deleting the addition of Rs.5A3,68,495/- on account of Closing Stock valuation. 2.That on the facts and in the circumstances of the case, the learned CIT(Appeals) is legally correct and fully justified. both on facts and in law, in deleting the addition of Rs.6,28,01,826/- under 'Sundry Debtor '. 3. That on the facts and in the circumstances of the case. the learned CIT(Appeals) is legally correct and fully justified. both on facts and in law. in deleting the addition/disallowance of Rs.9,53,571/- under' Drilling & Blasting Expenses' 4.That on the facts and in the circumstances of the case, the learned CIT(Appeals) is legally correct and fully justified, both on facts and in law, in deleting the additions/disallowance of Rs.l,62,0001- booked under "Charity and donation". 5. That the Ground Nos. 6 to 1O in Revenue's appeal being identical and repetition of Ground Nos. 1 to 5 in Revenue's appeal accordingly ought to need to be dismissed. 6. That the Respondent craves leave to add, supplement, modify the grounds here-in- above before or at the time of hearing of the appeal. The assessee has raised the following grounds of appeal in ITANo. 278/CTK/2017 for A.Y.2012-13:- 1.That the order dated 10.03.2017 passed by the Learned Commissioner of Income Tax (Appeals)-1, Bhubaneswar [in short "CIT(Appeals)"], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer is against principles of natural justice, contrary to facts, arbitrary and erroneous and bad in law. 2.Additionl Disallowances under 'Peripheral Development Expenses' - Rs. 9,50,439/- a.That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in confirming the addition/disallowance to the extent of Rs. 9,50,439/- under 'Peripheral Development Expenses' is contrary to facts, arbitrary, excessive, erroneous and bad in law. b.That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in sustaining the disallowance of Rs. 9,50,439/- under 'Peripheral Development Expenses' in ignoring the documents filed in the Paper Book and by holding that there has to be direct and ITA No.420& others /CTK/2015 MGM Mineral Ltd. 6 intimate connection between the expenditure incurred and the business of the appellant and the appellant has not proved it is contrary to facts, arbitrary, excessive, erroneous and bad in law. C.That the aforesaid Rs. 9,50,439/- under 'Peripheral Development Expenses' is incurred by the assessee wholly and exclusively for the purpose of its business and on the facts and in the circumstances the case, the confirmation of disallowance of the said Rs. 9,50,439/- is on mis-appreciation of Icontrary to facts, arbitrary, erroneous and bad in law. d.That on the facts and in the circumstances the case, the learned AO in making the disallowance of Rs. 9,50,439/- under 'Peripheral Development Expenses' by holding that there has to be direct and intimate connection between the expenditure incurred and the business of the appellant and the appellant has not proved it is contrary to facts, arbitrary, excessive, erroneous and bad in law. e.That on the facts and in the circumstances the case, the Learned CIT(Appeals) ought to have deleted the aforesaid Rs. 9,50,439/- which are incurred wholly and exclusively for the purpose of business of the assessee. 3. Disallowances under "Corporate Social Responsibility (CSR) Expenses" - Rs. 9,98,469/- a.That on the facts and in the circumstances the case, the order of the learned CIT(Appeals) in confirming the addition/disallowance of Rs.9,98,469/- under the nomenclature "Corporate Social Responsibility (CSR) Expenses" is contrary to facts arbitrary, excessive, erroneous and bad in law. b.That on the facts and in the circumstances the case, the learned CIT(Appeals) in 'confirming the addition/disallowance of Rs.9,98,469/- under the nomenclature "Corporate Social Responsibility (CSR) Expenses" by holding that the appellant has failed to prove the business expediency or necessity to incur the said expenses is . contrary to facts, arbitrary, excessive, erroneous and bad, both in the eye of law and on facts. c.That the aforesaid amount under "Corporate Social Responsibility (CSR) Expenses' has been incurred wholly and exclusively for the purpose of business and therefore ought to be fully allowable as deduction u/s.37 of the Act. d.That on the facts and in the circumstances the case, the aforesaid Rs. 9,98,469/- under the nomenclature "Corporate Social Responsibility (CSR) Expenses' be fully deleted. 4. Additionl Disallowances under "Charity and donation"- Rs.l,OS,2S0/- a.That on the facts and in the circumstances the case, the order of the learned Commissioner of Income Tax (Appeals) in confirming the addition/disallowance of Rs.l ,05,2501- under "Charity and donation" is contrary to facts arbitrary, excessive, erroneous and bad in law. b.That the Learned CIT(Appeals) has mis-appreciated the facts and his holding that for the aforesaid Rs.l,05,2501- under the nomenclature "Charity and donation" no correlation has been established by the appellant in incurring the expenses with the ITA No.420& others /CTK/2015 MGM Mineral Ltd. 7 business expediency, is arbitrary, excessive, erroneous and bad, both in the eye of law and on facts. c.That the aforesaid Rs.l,05,2501- under the nomenclature "Charity and donation" is incurred by the assessee is wholly and exclusively for the purpose of its business, the confirmation of the disallowance of the same is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. d.That on the facts and in the circumstances the case, the aforesaid Rs.l ,05,2501- under the nomenclature "Charity and donation" ought to be deleted. 5.That the appellant craves leave to add to, supplement modify the grounds hereinabove before or at the hearing of the appeal. The Revenue has raised the following grounds of appeal in ITANo. 242/CTK/2017 for A.Y.2012-13 1. On the facts and in the circumstances of the case, the ld. CIT(A) is not justified in law as well as on fact in deleting addition of Rs.16,11,43,067/- towards suppression of turnover. 2. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. The Assessee has raised the following grounds of appeal in CONo. 04/CTK/2017 for A.Y.2012-13 That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) ("CIT (Appeals)") is legally correct and fully justified, both on facts and in law, in deleting the addition ofRs.16, 11,43,0671- under 'Suppression of sales'. 2.That on the facts and in the circumstances of the case, there being no Suppression of sales, the learned CIT (Appeals) is legally correct and fully justified, both on facts and in law, in deleting the addition of Rs.l6,1l,43,067/- made by the learned AO towards 'Suppression of sales' .. 3. That the appeal filed by the revenue ought to be dismissed. 4.That the Respondent craves leave to add, supplement, modify the grounds here-in- above before or at the time of hearing of the appeal. We will first take up grounds of Cross appeals for A.Y.2010- 11 and cross objection filed by the assessee. 3. Brief facts of the case as culled out from the records are that the assessee is a limited company engaged in the mining ITA No.420& others /CTK/2015 MGM Mineral Ltd. 8 business. E-return of income for A.Y.2010-11 filed on 29.09.2010 declaring income of Rs.20,07,82,670/- under the normal provisions of the Income Tax Act and the income of Rs.20,11,18,638/- declared u/s 115JB of the Act. Case selected for scrutiny followed by serving of notices u/s 143(2) & 142(1) of the Act. Various informations and details called for were filed by the assessee. Ld. AO examined the valuation of closing stock in detail. For the purpose of valuation of closing stock assessee has adopted the method of production cost or market value which is lower. Closing stock valued by the assessee is Rs.24,86,305/-. However, Ld. AO on the basis of detailed observations made in the assessment order came to conclusion that since the assessee is in the mining business closing stock valuation should be at “Net Realizable Value “ Accordingly an addition of Rs.5,43,68,495/- was made towards under valuation of closing stock. Addition also made for unexplained sundry creditors and advance of Rs.1,20,36,869/- for lack of necessary details which could not be furnished by the assessee. Similarly addition for unexplained sundry debtors made at Rs. 6,28,01,826/-. Disallowance made for, drilling and blasting expenses at Rs.9,53,571/-, Charity and donation at Rs.1,62,000/- , advertisement & Publicity expenses at Rs.9,54,500/- Rent expenses at Rs. 7,09,476/- made for lack of details of TDS deducted on such rent payment, disallowance of Peripheral Development Expenses at Rs.17,23,676/- being not incidental to the business. Disallowance also made for afforestation charges at Rs.40,000/-. Accordingly income assessed at Rs.33,45,33,080/-. ITA No.420& others /CTK/2015 MGM Mineral Ltd. 9 4. Aggrieved assessee preferred an appeal before the Ld. CIT(A) and partly succeeded. 5. Now both the assessee and revenue are in appeal before this Tribunal and assessee has also raised cross objection in support of finding of Ld. CIT(A). The representation of both the sides heard at length, the case records carefully perused with the assistance of Ld. counsel for the assessee and Ld. DR. Documentary evidences brought on record from both the sides in the form of paper book in light of Rule 18(6) of I.T.A.T. Rules and the judicial decisions relied upon by both the sides have been considered and perused. 6. Ld. DR vehemently argued supporting the orders of the Ld. AO and Ld. CIT(A) for the grounds raised by the assessee and supported the order of the ld. AO for the additions challenged by the revenue. 7. Per contra Ld. counsel for the assessee supported the finding of ld. CIT(A) on the issues where relief has been granted and for the remaining issues referred to the submissions made before both the lower authorities. 8. We have heard rival contentions and perused the records placed before us. We will first take up the grounds raised by the revenue for A.Y. 2010-11 9. Ground No.1 of revenue‟s appeal challenges the deletion of addition of Rs. 5,43,68,495/- made by the Ld. AO on account of difference in closing stock valuation. We notice that the assessee is consistently following the valuation method of “cost or market price” whichever is lower. For the purpose of ITA No.420& others /CTK/2015 MGM Mineral Ltd. 10 valuing closing stock ld. AO based on his own finding that those assessees engaged in the mining business should always value closing stock at net Realisable value. However, Ld. AO failed to give any finding on the fact that when method of valuation closing stock is consistently being followed then only the year of taxability of sale of goods may change but the impact is revenue natural. We find that Ld. CIT(A) after making elaborating discussion in the impugned order taking note of the observations of the Ld. AO, submissions made by the assessee and after following judicial precedents deleted the impugned addition observing as follows: “I have considered the matter and find merit in the submission of the appellant. The appellant has valued the closing stock by following the average cost method, though this method has not been properly followed. It was found by the AO that the average cost determined by the assessee is incorrect and there is a substantial variation between the average cost of Rs.89.21 per MT taken by the committed in computing the closing stock value cannot be a reason to compel the appellant to discard the consistently followed average value method and replace that with the NRV method. Under similar facts and circumstances, the ld. CIT(A), Berhampur, in the case of M/s Orissa Mining Corporation Ltd. has decided the issue of valuation of closing stock in favour of the appellant for the A.Ys 2008-09 & 2009-10. I have gone through the order of the Hon'ble I.T.A.T. in the case of M/s Orissa Mining Corporation Ltd. for the A.Y.2008-09 in ITANo.552/CTK/2012 and for A.Y.2009- 10 in ITANos. 163 & 177/CTK/2013 dated 8.11.2013 dated 8.11.2013, confirming the order of the CIT(A). since the attendant facts in the impugned case are same as in the case of M/s Orissa Mining Corporate Ltd. For AYs. 2008-09 and 2009-10, the addition made by the AO for the amount of Rs.5,43,68,495/- following NRV method is hereby deleted. ITA No.420& others /CTK/2015 MGM Mineral Ltd. 11 9.1 From perusal of the finding of Ld. CIT(A) as well as the submission made by the assessee before us, we find that the assessee is valuing its Iron Ores closing stock at the „ Mine‟s Head‟ at the production cost and the closing stock of Iron Ore at the „crusher head‟ is valued at cost which also includes transportation cost of Rs.100/- per M.T., since the inventory cost has to include all the expenses bringing inventory to the location. We, also find that the assessee has been consistently and correctly following the well-recognized and generally accepted accounting method of valuing the closing stock at lower of production cost or the net realizable value since last many years and in subsequent years also. Even the valuation method of valuing closing stock has always been accepted by the revenue authorities in the past assessments also. In our view Ld. AO erred in valuing stock at net realizable value ignoring the settled judicial precedents that the assessee is allowed to follow one of the valuation method as permissible in law and the same should be followed consistently and in case there is a change in the closing stock valuation method, impact of such change needs to be brought to tax or allowed as expenses as the case may be. However, in the instant case assessee is consistently following the closing stock valuing method of “at production cost or net realizable” value whichever is less. The finding of Ld. CIT(A) is duly supported by the decision rendered of this Tribunal in the case of M/s. Orissa Mining Corporation Ltd. for A.Y.2008-09 in ITANo.552/CTK/2012 upholding the method of valuation adopted by the assessee by valuing closing stock. ITA No.420& others /CTK/2015 MGM Mineral Ltd. 12 9.2 One more fact which is discernable from records is that the assessee calculated the closing stock at Rs.24,86,305/- which was reflected in the audited financial statements, but during the proceedings before the first Appellate Authority, revised sheet showing cost of production was filed wherein closing stock has been valued at Rs.44,24,530/- and necessary direction has already been given by Ld. CIT(A) to the Ld. AO to adopt the valuation of closing stock at Rs.44,24,530/-. 9.3 Under these given facts and circumstances of the case we find no inconsistency in the finding of ld. CIT(A) deleting the addition for under value of closing stock at Rs.5,24,30,270/-( addition made by the Ld. AO at Rs.5,43,68,495- less increase in closing stock value due to incorrect valuation of closing stock at Rs. 19,38,227/-). In the result grounds no.1 raised by the revenue is partly allowed. 10. Ground No.2 has been raised by the revenue towards deleting the addition for unexplained sundry debtors at Rs. 6,28,01,826/-. We find that Ld. AO disallowed the sundry debtors at Rs.6,28,01,826/- for lack of furnishing details in case of following parties: Sr. Name Amount i. Action Ispat & Power Pvt. Ltd. Rs.1,87,69,472/- ii. M/s Surendera Mining Industries Pvt. Ltd. Rs.25,01,719/- iii. Prakash Industries Ltd. Rs.1,02,07,732/- iv. SMC Power Generation Ltd. Rs.64,61,829/- v. Sree Ram Pur Steel Pvt. Ltd. Rs.2,33,70,041/- vi. Mestro Minerals (India) Pvt. Ltd. Rs.14,91,033/- ITA No.420& others /CTK/2015 MGM Mineral Ltd. 13 10.1 We find that the addition was made for not furnishing the details before the ld. AO Ld. counsel for the assessee had contended that all necessary details were furnished during the assessment proceedings. Further the details were again furnished before the ld. CIT(A) which included the details of sundry debtors, there address, PAN No., ledger account. 10.2 Before us also all the relevant details have been filed and these sundry debtors are duly disclosed in the books account and are part of the trade receivable. We do not find any reason to raise any suspicion on the genuineness of the sundry debtors forming part of the audited balances sheet and therefore find the Ld. CIT(A) has rightly deleted the impugned addition made by the ld. AO towards sundry debtors of Rs. 6,28,01,826/-. Thus, ground no.2 raised by the revenue is dismissed. 11. Ground No.3 raised by the revenue relates to disallowance of drilling and blasting expenses at Rs. 9,53,571/-. Assessee has filed complete details of drilling and blasting expenses in the paper book placed before us. There is an increase of drilling and blasting expenses of Rs. 9,53,571/- which Ld. AO has disallowed based on his observation that there is a fall in extraction of Iron ore during the year. However, Ld. AO has not found any adversity in the genuineness of bills and vouchers filed by the assessee and without doing this exercise Ld. AO was not correct in making the disallowance. Under these given facts and circumstances Ld. CIT(A) has rightly deleted the addition holding that Ld. AO did not make any ITA No.420& others /CTK/2015 MGM Mineral Ltd. 14 enquiries to reach the finding of that expenses are bogus or inflated. Ground no.3 raised by the revenue stands dismissed. 12. Ground No.4 relates to charity and donation expenses claimed at Rs.1,62,000/-. Ld. AO disallowed the claim being not incurred for business purpose. Ld. CIT(A) deleted the addition by giving a general finding that the same needs to be spent for every business entity. We, however, find no merit in the finding of Ld. CIT(A) since on perusal of page 79 of the paper book we find that the expenses book under the head of charity and donation are not for the purpose of business as they have been paid to Educational Institutions, Red Cross Society etc. The assessee ought to have suomoto added them back while computing the total income. We, thus, set aside the finding of Ld. CIT(A) and confirm the disallowance for charity in donation at Rs.1,26,000/-. 13. Ground no.5 raised by the revenue is general in nature which needs no adjudication. 14. Thus, appeal of revenue for A.Y. 2010-11 is partly allowed. Now we take up assessees appeal for A.Y.2010-11 15. Ground No.1 is general in nature which needs no adjudication. 16. Ground No.2 raised by the assessee relates to addition for creditors & advances of Rs.1,20,36,869/- consisting of following: i. Castrol India Ltd. Rs.9,19,022/- ii. Hiralal Agency Pvt. Ltd. Rs.24,99,894/- iii. Ganesh Sales Corporation Rs.35,00,000/- ITA No.420& others /CTK/2015 MGM Mineral Ltd. 15 iv. Maa Samleswario Sponge Iron Ltd. Rs.15,39,480/- v. Rabindra Kumar Agarwal Rs.31,50,000/- vi. Maa Tarini Industries ltd. Rs.4,28,473/- 16.1 Assessee has claimed to have filed all details before both the lower authorities. The same has also been filed before us. On perusal of the ledger accounts of all the above referred parties we find that the above stated parties are sundry creditors/advances relating to the business run by the assessee. In the case of Maa Tarini Industries Ltd., Maa Samleswario Sponge Iron Ltd & Ganesh Sales Corporation, transactions shown are of sales to these parties. The remaining parties are sundry creditors for expenses Name address and PAN No. of these parties are on record. Both the lower authorities failed to make necessary enquiry to verify the genuineness of these sundry creditors. 16.2 We, therefore, under the given facts and circumstances of the case and also respectfully following the judgments of following Supreme Court in the case of CIT vs. Orissa Corpn. P. Ltd. (1986) 159 ITR 78, CIT vs. P. K. Noorjahan (1999) 103 Taxman 382, CIT vs. Ritu Anurag Agarwal (2010) 2 Taxmann.com 134(Delhi) as well as the facts that the sundry creditors are prima facie genuineness in view of the details filed before us and also the same being verified by the auditors as they are reflected in the audited balance sheet find no justification for the finding of both lower authorities and accordingly we delete the addition of unexplained creditors & advances of Rs.1,20,36,869/- and allow ground no.2 raised by the assessee. ITA No.420& others /CTK/2015 MGM Mineral Ltd. 16 16.3 Ground No.3 raised by the assessee relates to disallowances of Peripheral Development Expenses of Rs.17,23,676/-. Ld. AO disallowed the expenses holding that the same has not been incurred for commercial expediency and the same view was taken by the Ld. CIT(A) also. We observe that assessee is into the business of mining which is normally carried out at remote areas where living facility are minimum and in order to carry out the business activity of mining efficiently expenses may not be directly linked to the type of business being carried out but are germane to such business and indirectly helps to carry out mining activities smoothly. Perusal of the ledger account of Peripheral expenses shows that major component of the alleged sum at Rs.17,23,676/- includes the following: i. Payment of EZMA towards subscription towards road construction from Bhadrashi to Kiribum Chhacka at Rs.3,64,389/- ii. Despansary building constructed at Gonua at Rs.3,92,446/- iii. Soil Filing, leveling, hedging & gardening for BMC development work no accounted for Rs.2,85,066/- iv. Printing of Tribal mural in BMC Road side boundry now accounted for Rs.1,00,000/- v. Purchase of power blocks and transportation Rs.1,17,250/- vi. Construction of Patabeda School, medical and water tank Rs.91,396/- 16.4 From perusal of the nature of expenditure incurred by the assessee under the head of Peripheral Expenses some of which are indicated above in itself are sufficient to indicate that they are for the benefit of labourers and staff working in the mining and are incurred for providing medical and educational facilities, road to connect to the place of business ITA No.420& others /CTK/2015 MGM Mineral Ltd. 17 and most importantly such type of expenses helps the assessee to retain its efficient and skilled employees and to give them a quality life under tough conditions which goes without saying that happy satisfied employees always add to the growth of business. 16.5 We are surprised to note that both lower authorities failed to find any merit in these genuine claim made by the assessee under the head Peripheral expenses. In our view the expenses incurred by the assessee are purely for commercial expediency and for the overall growth and development of the mining business. Though, the assessee has referred to the various judgments and decisions which are applicable on the issue raised before us, however, since we are satisfied with the facts of the case and the genuineness of the claim of this expenditure we are not reproducing the finding of various decisions. We, accordingly reverse the finding of Ld. CIT(A) and allowed ground no.3 raised by the assessee. 17. Ground no.4 raised by the revenue relates to disallowance of afforestation of expenses of Rs.40,000/-. Ld. CIT(A) has disallowed this claim giving a fact that the said payment is not towards afforestation but for cost of seedlings. We, however fail to find any merit in the finding of Ld. CIT(A) since the alleged expenses are incurred towards cost of seedlings paid to forest officer for planting trees which ultimately, helps in a afforestation. Since the assessee is into the mining business such expenses should be allowed and even otherwise some amount has been paid to Government Department towards afforestation only. Thus, finding of Ld. CIT(A) is reversed and ITA No.420& others /CTK/2015 MGM Mineral Ltd. 18 disallowance for afforestation expenses at Rs.40,000/- is deleted. Ground no.4 raised by the assessee is allowed. 18. Ground No.5 raised by the assessee relates to disallowance u/s 40(a)(ia) in respect of advertisement & publicity at Rs.9,54,500/- and rent expenses of Rs.7,09,476/-. Ld. AO made the disallowance for lack of necessary details Ld. CIT(A) restored the matter to the Ld. AO for examining it with the detail of TDS deducted and deposited by the assessee. We, however, on perusal of details of advertisement and publicity at pages 178 to 249 of the paper book showing list of expenses of Rs.9,54,500/-, find that the assessee has rightly deducted tax at source on the applicable expenses. Therefore, no disallowance was called for u/s40(a)(ia) of the Act for the advertisement and publicity expenses of Rs.9,54,500/-. 18.1 As regards the issue of disallowance of rent expenses at Rs.7,09,476/- on perusal of the page 40 to 41 of the paper book we find that the payment of rent is gieven to Pankaj Mundra and Neha Mudnra and the assessee had duly deducted the tax on the payment of rent to these two persons which is supported by form No.16A placed at page 49 to 50 of the paper book. Under these given facts no disallowance of rent expenses at Rs.7,09,476/- was called for u/s 40(a)(ia) of the Act. Thus, ground no.5 of the assessee appeal is allowed. 19. In the result appeal of the assessee is partly allowed. 20. As far as the Cross Objection filed by the assessee in C.O.No. 55/CTK/2015 for A.Y.2010-11 is concerned, on perusal of the grounds we find that all the grounds are merely ITA No.420& others /CTK/2015 MGM Mineral Ltd. 19 supporting the finding of Ld. CIT(A) and since we have already dealt with the relevant finding of Ld. CIT(A) while adjudicating the grounds of appeal, the grounds raised by the assessee in this cross objection are dismissed as infructuous. Now we take up Cross appeal for A.Y.2012-13 and Cross Objection filed by the assessee. 21. Brief facts of the case are that the assessee filed the return of income on 29.09.2012 declaring income of Rs.32,64,61,970/-. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Considering the details of the assessee along with disallowance made by Peripheral Development Expenses at Rs.9,50,439/-, disallowance of corporate Social responsibility (CSR) at Rs.9,98,469/-, disallowance of charity and donation at Rs.21,35,250/- & disallowance of expenses for purchase of water sprinkling system amounting to Rs.17,13,600/-. Ld. AO also made an addition for suppression of sales of iron ore at Rs.16,11,43,067/-. Income assessed at Rs.49,16,89,200/-. Assessee carried the matter before the Ld. CIT(A) challenging various additions but partly succeeded. 22. Now both the assessee and revenue are in appeal before this Tribunal and assessee has also raised cross objection in support of finding of Ld. CIT(A). The representation of both the sides heard at length the case records carefully perused with the assistance of Ld. counsel for the assessee and Ld. DR. Documentary evidences brought on record from both the sides in the form of paper book in light of Rule 18(6) of ITA No.420& others /CTK/2015 MGM Mineral Ltd. 20 I.T.A.T. Rules and the judicial decisions relied upon by both the sides have been considered and perused. 23. Ld. DR vehemently argued supporting the orders of the Ld. AO and Ld. CIT(A) in regard to the addition challenged by the assessee and supported the order of the ld. AO for the additions challenged by the revenue. 24. Per contra Ld. counsel for the assessee supported the finding of ld. CIT(A) on the issues where relief has been granted and for the remaining issues referred to the submissions made before both lower authorities. 25. We have heard rival contentions and perused the records placed before us. We will first take up the grounds raised by the revenue for A.Y. 2012-13 26. In the revenue‟s appellant sole ground relates to deletion of addition of suppression of sales of iron ore at Rs.16,11,43,067/- made by the Ld. AO. Facts in brief relating to this issue are that Ld. AO found that the assessee suppressed its turnover by making the sales at lower rate to one of the its sister concern M/s. MGM Ltd and for doing the same the Ld. AO ascertained the market rate and applied it on the quantity. We find that Ld. CIT(A) after examining the issue in detail and the submissions made by the assessee came to conclusion that Ld. AO was not justified in making addition for suppression turnover at Rs.16,11,43,067/- observing as follows: “4.2 I have gone through the materials on record, the reasons for which the AO has made the addition and the written submission of the assessee. The addition made by the AO is ITA No.420& others /CTK/2015 MGM Mineral Ltd. 21 entirely based on comparison with the rate of iron ore in the open market. It is a fact that the assessee has sold iron ore to its sister concern M/s. MGM Steels Ltd. at almost half of the market price. Now the most relevant question is whether the differential amount can be taxed in assessment as suppression of sales. In the course of survey, no evidence has been unearthed to show that the assessee has sold more quantity of iron ore to MGM Steels Ltd. Than what is reflected in the books. There is also no evidence brought on record by the AO that the assessee has actually sold iron ore at a higher rate to MGM steels ltd. and recorded lesser amount in the books. It is well settled that income which has neither accrued nor arisen cannot be taxed unless there is a specific provision in the Income Tax Act to tax the same. For A.Y. 2012-13, no such provision was in existence in the Act to tax the notional income involved in the seemingly collusive transactions to the type which the assessee has entered into with its sister concern M/s MGM steels Ltd. Subsequently, section 92BA has been inserted in the Act w.e.f. 01.04has entered into with its sister concern M/s MGM steels Ltd. Subsequently, section 92BA has been inserted in the Act w.e.f. 01.04013 to bring the concept of Arm’s Length price to specified domestic transactions. Computation of Arm’s Length Price for the purpose of computation of taxable income from specified domestic transactions is relevant only for the A.Y.2013-14 and subsequent assessment year. What the AO has done in assessment is to revalue the sales made to MGM Steels Ltd. at Arm’s Length price which is not permissible for the assessment year 20120-13. In this view of the matter, it is held that the addition of Rs.16,11,43,067/- made by the AO on account suppression of turnover is unjustified. Hence the same is deleted. 26.1 On going through above finding and the submissions made by the assessee we find that the assessee was required to set up integrated steel plant in view of the stipulation made by the government of Odisha that all the mines renewal will be allowed if value addition is made. For the Integrated Steel Plant, raw material required is iron ore. Assessee is engaged in the business of iron ore which is a raw material for Integrated Steel Plant. Price of Iron ore to be supplied by the ITA No.420& others /CTK/2015 MGM Mineral Ltd. 22 assessee to Integrated steel plant was fixed in such a manner that the projects of Integrated steel plant runs at an economical competitive price. It is also an important fact that in order to make value addition to the business of extracting iron ore and manufacturing Iron and steel both the companies i.e. MGM Minerals Ltd. & MGMSL moved before the Hon'ble High Court of Odisha for the merger i.e. 01.04.2012 and the said merger has been approved by the Hon'ble High Court vide order dated 06.09.2013. We also find merit in the contention of the Ld. counsel for the assessee that to make the company MGMSL eligible for obtaining mining lease it was required to make value addition by way of establishing steel plant in the State so that State Government recommend for the lease for mining of iron ore. It is also not in dispute that there is no suppression in the quantity of iron ore by the assessee. Ld. AO has failed to bring on record any material evidence to prove that there is suppression of sales of iron ore. It is also noteworthy that the provisions of section 92BA have been inserted w.e.f. 01.04.2013 bringing the concept of Arm‟s Length Price to specified domestic transaction. The year under appeal is A.Y. 2012-13 and therefore, the provisions of section 92BA of the Act are not applicable. Also during the course of survey no evidence was unearthed to show that the assessee sold more quantity of iron ore to MGM Steel Ltd. then what is reflected in the books. Therefore, so for as the sales of the assessee are concerned even though the sales made to its sister concern MGM Steel Ltd. is half the price to price charged from other parties there is no provision under the Act to make addition of suppression of sales in the hands of ITA No.420& others /CTK/2015 MGM Mineral Ltd. 23 assessee because there is no defect pointed out in the documentary evidences pertaining to quantity sold during the year and same being rightly reflected in the books of account. Certainly revenue may had a good case if this issue been examined in the hands of MGM Ltd. for the purchase of iron ore from the assessee MGM Meneral Ltd. and in that case the provision of section 40A(2)(a) and 40A(2)(b) of the Act may have been attracted by the revenue authorities. For revenue authorities Arm‟s Length Price of the specific domestic transaction can be examined under provision of section 92BA of the Act but the same is effective from 01.04.2013 and is not applicable in the year under appeal and therefore, we find no infirmity in the finding of Ld. CIT(A) who has rightly held that there is no case of suppression of sale, and Ld. AO was not justified in making the addition of Rs. 16,11,43,067/- in the hands of assesse. We, therefore, dismiss revenue‟s ground no.1. 27. Ground no.2 raised by the revenue is general in nature which needs no adjudication. 28. In the result, appeal of the revenue for A.Y.20120-13 is dismissed. Now we take up assessees appeal for A.Y. 2012-13 29. Ground no.1 is general in nature which needs no adjudication. 30. Ground No.2 & 3 related to disallowance of Peripheral Development Expenses at Rs. 9,50,439/- and corporate social responsibility (CSR) at Rs. 9,98,469/-. ITA No.420& others /CTK/2015 MGM Mineral Ltd. 24 30.1 We find that the issue of Peripheral Expenses has been adjudicated by us in the case of assessee for A.Y.2010-11 wherein we found that the expenses incurred towards construction of roads, health, education and other related expenses for the betterment of life of employees and also to keep a healthy environment. Alleged expenses were incidental to the business in the instant year also. Similar type of expenses have been incurred by the assessee towards flat light fitting, water pomp, power supply to villages, schools, teachers salary, etc. All these expenses are somehow directly or indirectly incidental to the business beneficial to employees and for the overall growth of the business and therefore, taking a consistent view we delete the disallowance of Peripheral Development Expenses of Rs.9,50,439/- and allow ground no.2 raised by the assessee. 30.2 As regards the expenses incurred towards corporate social responsibility, we find that the assessee has incurred the expenses towards planation program Environmental Development Scholarship/Award to students, social work at mines area. All these expenses are also similar to the nature of Peripheral Expenses. The Corporates are obliged to make expenditure towards corporate social responsibility and assessee being in the field of mining has to incur something more than the others. Major expenses incurred are towards scholarship for students studying in B. Tech Thesis and such students only will come forward to work as employee of the assessee company or other similar type of industries. It is a well-known fact that intelligent and hardworking employees are the back bone of any successful Enterprise. Such ITA No.420& others /CTK/2015 MGM Mineral Ltd. 25 expenses incurred by the assessee towards CSR are for good economic growth and betterment of business. We, are thus, satisfied that the alleged expenses are incurred wholly and exclusively for the purpose of business and deserve to be allowed u/s 37 of the Act. We, thus, allow ground no.3 raised by the assessee. 31. Ground No.4 related to the disallowance of charity donation of Rs. 1,05,250/-. We have perused the detail of charity donation placed at page no.124 of the paper book and find that they are donation to some cricket Association, Red Cross, religious program etc. which are not remotedly related to business activity either directly or indirectly and thus confirm the disallowance of charity donation of Rs.1,05,250/-. Ground no.4 raised by the assessee is dismissed. Ground no.5 is general in nature which needs no adjudication. 32. As a result, appeal of the assessee for A.Y.2012-13 is partly allowed. 33. Cross Objection raised by the assessee for A.Y.2012-13 through C.O.No.04/CTK/2018 are only supporting the finding of Ld. CIT(A) and therefore, the same are dismissed as infructuous, since we have already dealt with all the issues raised in the cross appeal. 34. In the result, for A.Y. 2010-11 Cross appeals in ITANo.420/CTK/2015 & ITANo.408/CTK/2015 are partly allowed and CO No.55/CTK/2015 is dismissed as infructuous and for A.Y. 2012-13 revenue‟s appeal No.242/CTK/2017 is ITA No.420& others /CTK/2015 MGM Mineral Ltd. 26 dismissed, assessee‟s appeal No.278/CTK/2017 is partly allowed and CO No.04/CTK/2018 is dismissed as infructuous. Order pronounced as per Rule 34 of I.T.A.T., Rules 1963 on 05.01.2022. Sd/- (सी.एम.गगा) (C.M.GARG) Sd/- (मिीष बोरड़) (MANISH BORAD) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 05/01/2022 Patel, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकि आय ु क्त(अऩील) / The CIT(A), 4. आयकि आय ु क्त / CIT 5. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, ITAT, Cuttack 6. गार्ा पाईल / Guard file. सत्यावऩत प्रनत //True Copy//