Appeal Details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 3918 (ITAT-JABALPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 11 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-02-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
2015-2016
Appeal Filed On
20-03-2018
Judgement Text
I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 1 IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.51/JAB/2018 ASSESSMENT YEAR:2015-16 M/S. SHOBHA MINERALS (KEVLARI) 765 NEAR ANAND TALKIES, NAPIER TOWN, JABALPUR [PAN: ABIFS 4245A] VS. ASST. CIT, CENTRAL CIRCLE, JABALPUR ITA NO.77/JAB/2018 ASSESSMENT YEAR:2015-16 ASST. CIT(CENTRAL), JABALPUR VS. M/S. SHOBHA MINERALS (KEVLARI) 765 NEAR ANAND TALKIES, NAPIER TOWN, JABALPUR [PAN: ABIFS 4245A] (APPELLANT) (RESPONDENT) ITA NO.52/JAB/2018 ASSESSMENT YEAR:2015-16 M/S. SHOBHA MINERALS (DHAMKI) 765 NEAR ANAND TALKIES, NAPIER TOWN, JABALPUR [PAN: ABMFS5899N] VS. ASST. CIT, CENTRAL CIRCLE, JABALPUR ITA NO.78/JAB/2018 ASSESSMENT YEAR:2015-16 ASST. CIT(CENTRAL), JABALPUR VS. M/S. SHOBHA MINERALS (DHAMKI) 765 NEAR ANAND TALKIES, NAPIER TOWN, JABALPUR [PAN: ABMFS 5899N] (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAHUL BARDIA, CA SHRI DARSHAN, SINGH, ADVOCATE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 2 O R D E R PER SANJAY ARORA, AM: THIS IS A SET OF FOUR APPEALS, BEING CROSS APPEALS FOR ASSESSMENT YEAR (AY) 2015-16 IN RESPECT OF TWO ASSESSEES, BEING TWO PARTNERSHIP FIRMS IN THE BUSINESS OF MINING OF IRON ORE (SHOBHA MINERALS (KE VLARI)) AND MANGANESE ORE (SHOBHA MINERALS (DHAMKI)), CONTESTING THEIR AS SESSMENTS FOR THE SAID YEAR UNDER SECTION 143(3) OF THE INCOME TAX ACT, 19 61 (THE ACT HEREINAFTER), SINCE PARTLY CONFIRMED BY THE COMMISSIONER OF INCOM E TAX (APPEALS)-1, JABALPUR (CIT(A)) VIDE HIS SEPARATE ORDERS DATED 17/1/2018 & 18/1/2018. THE BACKGROUND FACTS 2. THE FACTS AND CIRCUMSTANCES OF THE CASE, AND THE RESPECTIVE CASES OF THE PARTIES BEING THE SAME FOR BOTH THE ASSESSEES, THE APPEALS WERE POSTED FOR HEARING AND, ACCORDINGLY, HEARD TOGETHER. THE FIRMS ARE ALSO RELATED INASMUCH AS SH. NITIN SHARMA HAS 50% SHARE IN BOTH THE FIRMS , AS ALSO IN M/S. SAGAR STONE INDUSTRIES, JABALPUR, ANOTHER ASSOCIATE CONCE RN. FOR THE SAKE OF CONVENIENCE, WE SHALL, FOR NARRATION PURPOSES, STAT E THE FACTS WITH REFERENCE TO SHOBHA MINERALS (KEVLARI) (WITH REFERENCE TO WHICH THE APPEALS WERE ARGUED), NOTING THE DIFFERENCES, WHERE DEEMED RELEVANT, FOR SHOBHA MINERALS (DHAMKI), IN BRACKETS. BOTH THE FIRMS, AS ALSO SAGA R STONE INDUSTRIES (SSI), WERE SUBJECT TO SEARCH AND SEIZURE OPERATION U/S.13 2(1) OF THE ACT ON 16/10/2014, WHICH COVERED BOTH THEIR OFFICE PREMISE S AND MINING SITES. THE ASSESSEE HAD, VIDE LEASE DEED DATED 19/6/2007 (29/8 /1992), BEEN GRANTED LEASE OF 4.03 HECTARES (3.60 H.) OF LAND AT VILLAGE KEVLA RI (GANDHIGRAM), DISTRICT RESPONDENT BY SHRI H.P. MEENA, DR DATE OF HEARING 13/12/2019 DATE OF PRONOUNCEMENT 24 /02/2020 I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 3 SIHORA, FROM THE MINING DEPARTMENT OF THE STATE GOV ERNMENT OF MADHYA PRADESH. THE ASSESSMENT AND VALUATION OF STOCK IN C ASE OF MINING BEING A TECHNICAL MATTER, ASSISTANCE, BY ISSUING COMMISSION S U/S.131(1)(D), WAS OBTAINED BY THE REVENUE FROM INDIAN BUREAU OF MINES , NAGPUR (IBM) AND MINERAL EXPLORATION CORPORATION LTD., NAGPUR (MECL) FOR CARRYING OUT VOLUMETRIC MEASUREMENTS AND CHEMICAL ANALYSIS (OF T HE SAMPLES) AT THE KEOLARI AND DHAMKI MINES RESPECTIVELY. THE IBMS RE PORT DATED 04/12/2014, FURNISHED HAVING REGARD TO MECLS REPORT DATED 29/1 1/2014, IS AS UNDER: BLOCK A TABLE 1A LOCATION OF DUMP VOLUME DENSITY AS PER MINING QUANTITY (MT) MECL 1 313.40 3 940.200 MECL 3 1,757.30 3 5,271.900 MECL 2,4,7,12 & 15 19,695.00 3 59,083.500 MECL 8,9A,10,1&11 16,322.00 3 48,966.300 MECL 14 557.10 3 1,671.300 MECL 13 6,487.40 3 19,462.200 MECL 13 141.80 3 425.400 MECL 13 3.60 3 10.800 TOTAL 1,35,681.600 BLOCK B TABLE 1B LOCATION OF DUMP VOLUME BULK DENSITY QUANTITY (MT) AVERAGE GRADE (FE %) REMARK G 1 423.8 3.06 1296.82 SAMPLE HAS NOT BEEN COLLECTED BY MECL SUB GRADE DUMP G 2 517.3 3.06 1582.93 SUB GRADE DUMP G 3 12915 3.06 39518.67 SUB GRADE DUMP G 4 285.3 3.06 873.01 SUB GRADE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 4 DUMP TOTAL 14141 43,271.43 (MT = > METRIC TONNES) AS PER THE REPORTS SUBMITTED BY MECL, THE AVERAGE I RON GRADE OF THE SALEABLE STOCK OF IRON ORE (1,35,681.6 MT/TABLE 1A) WAS IN T HE RANGE OF 50% AND ABOVE, VARYING BETWEEN A LOW OF 50.12% (DUMP B) TO A HIGH OF 54.32% (DUMP F) (REPRODUCED AT PAGES 12 & 13 OF THE ASSESS MENT ORDER). NO SAMPLES WERE DRAWN BY IT FROM THE SUB-GRADE DUMPS. SH. NITI N SHARMA, PARTNER, IN HIS SWORN STATEMENT ON 7/1/2015 AND 8/1/2015, STATED TH AT THE FIRM WAS PAYING ROYALTY TO THE MINERALS DEPARTMENT (OF THE STATE GO VERNMENT) ON SALE OF IRON ORE AT IRON GRADE BELOW 55%. THE RELEVANT PART OF T HE STATEMENT IS ALSO EXTRACTED AT PAGE 26 OF THE IMPUGNED ORDER. THE SAM E THEREFORE MEANT THAT THE ENTIRE STOCK OF 1,35,681.6 MT OF IRON ORE WAS SALEA BLE AS REGULAR PRODUCTION. THESE RESULTS WERE COMPARED WITH THE DETAILS OF THE STOCK-IN-HAND AS REPORTED BY THE ASSESSEE TO IBM (I.E., THE REGIONAL CONTROLL ER OF MINES, JABALPUR) PER ITS MONTHLY RETURN, I.E., AS ON 31/10/2014, AS UND ER: TABLE 2 SR. NO. PARTICULARS QUANTITY (MT) AS ON 31.10.2014 REMARK 1. IRON-ORE 45,322.655 1) AS PER MINING RETURN FILED BY THE ASSESSEE FIRM 2) SUBGRADE DUMP INCLUDES ROAD, RAMPS & OTHER DEVELOPMENTS 2. LATERITE 2,376.750 3. MANGANESE 9,875.195 4. ROM 44,800.000 GROSS TOTAL 102374.600 5 SUB GRADE DUMP 1,92,400.000 TOTAL 2,94,774.600 (EMPHASIS, BY UNDERLINING, OURS) THE ASSESSEE, IN THE VIEW OF THE ASSESSING OFFICER (AO), THUS, HAD AN EXCESS STOCK OF IRON ORE AT 90,358.945 MT (I.E., 1,35,681. 600 45,322.655) AS ON I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 5 31/10/2014. (THE CORRESPONDING FIGURE FOR SHOBHA MI NERALS (DHAMKI) IS 16,828.812 MT, THE THRESHOLD LIMIT BEING 10%, ON WH ICH ROYALTY WAS BEING PAID, EVEN AS MECL REPORTED THE AVERAGE GRADE OF ST OCK TO BE IN THE RANGE OF 13%-18%). THE EXCESS PHYSICAL STOCK MEANT THAT THE ASSESSEE WAS ENGAGED IN UNDER-REPORTING OF PRODUCTION AND, CONSEQUENTLY, OU T-OF-BOOK SALES OF ORE PRODUCTION. THIS WAS FURTHER SOUGHT TO BE REFURBISH ED BY THE AO WITH REFERENCE TO THE STATEMENTS U/S. 132(4) OF SH. GHAN SHYAM PATEL, MINING MANAGER, DATED 17/10/2014 AND SH. NITIN SHARMA (NS) (DURING SEARCH & SEIZURE ON SAMDARIYA GROUP (SG) IN MAY, 2013). SH. GHANSHYAM PATEL, IN ANSWER TO QUESTIONS 11, 12, AND 16, ADMITTED TO MUL TIPLE (3 - 4) TRIPS ON A SINGLE TRANSIT-PASS (TP), JUSTIFYING THE NON-RECORD ING OF THE WEIGHT ON THE TP DATED 15/10/2014 ON THAT BASIS. FURTHER, THE SEIZED MATERIAL (S-4/LPS 13)(PGS. 1 131) (OF THE SEARCH ON SG IN MAY, 2013 ) REVEALED UNACCOUNTED CASH SALES BY SHOBHA MINERALS (KEVLARI), WHICH WAS ADMITTED PER SWORN STATEMENT/S, FILING RETURNS BY IT SURRENDERING AN A GGREGATE AMOUNT OF RS.813.97 LACS FOR AYS. 2011-12 & 2012-13 (INCORREC TLY NOTED AT RS. 401.44 LACS IN THE IMPUGNED ORDER). ACCORDINGLY, APPLYING A SALE RATE OF RS.3300 PER MT (PMT), I.E., AS ON SALES TO SUNFLAG IRON & STEEL (P.) LTD., BHANDARA, DURING THE RELEVANT YEAR, TO THE EXCESS STOCK OF 90,358.94 5 MT OF IRON ORE, HE PROPOSED AN ADDITION FOR RS. 2981.85 LACS. THE ASSE SSEE, IN REPLY, FILED ON 19/12/2016, EXPLAINED THE EXCESS STOCK ON THE BASIS OF THE MATERIAL LYING IN THE SUBGRADE DUMPS (1,92,400 MT)(REFER TABLE 2). THE SU BGRADE DUMPS CONTAINED, BESIDES UNUSABLE WASTE, ALSO VALUABLE MI NERALS, VIZ. IRON ORE, MANGANESE, LATERITE, ETC. AS PER THE MINING PLAN (W HICH PRESCRIBES THE STANDARD QUANTITY OF THESE CONSTITUENTS IN THE SUBGRADE WAST E) FOR 2013-14 TO 2017-18, APPROVED BY IBM, THE IRON ORE COMPONENT IS 85%, WIT H MANGANESE & LATERITE ORES BEING AT 5% AND 10% RESPECTIVELY. THE AO, THUS , HAD GONE WRONG IN NOT INCLUDING THE IRON ORE CONSTITUENT IN THE LOW-GRADE MATERIAL, OR 1,63,540 MT I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 6 (I.E., 85% OF 1,92,400 MT), CONSIDERING WHICH THE I RON ORE STOCK WORKS TO 2,08,862.655 MT (I.E., 45,322.655 MT + 1,63,540 MT) . THERE WAS, ACCORDINGLY, AN EXCESS BOOK-STOCK OF 73,181.055 MT (I.E., 2,08,862.655 1,35,681.600), OR 36,400.34 MT (IF THE IRON ORE COM PONENT (AT 85%) IN THE SUB-GRADE DUMP (43,271.43 MT), OR 36,750.715 MT, IS ALSO TAKEN INTO ACCOUNT), I.E., INSTEAD OF A SHORTFALL OF 90,358.94 5 MT, AS INFERRED BY THE AO. FURTHER, IT IS UNDISPUTED THAT THE OVERBURDEN (I.E. , THE INITIAL EXCAVATION OF THE TOP SOIL), HAD BEEN USED FOR FILLING PITS, LAYING R OADS, BUILDING RETAINING WALL, BACK-FILLING, ETC. NO EXCAVATED MATERIAL COULD, IN FACT, AS PER THE MINING ACT, BE REMOVED FROM THE SITE WITHOUT PERMISSION AND, BE SIDES, THIS MATERIAL IS TO BE USED FOR THESE PURPOSES. THIS EXPLAINS THE EXCES S BOOK-STOCK INASMUCH AS THE ASSESSEE HAD NOT KEPT ANY RECORD IN RESPECT OF THE WASTE/LOW-GRADE MATERIAL USED FOR SUCH PURPOSES, I.E., LAYING OF RO ADS, RAMPS, RETAINING WALL, BACK-FILLING, ETC. WHILE THE SAME DID NOT FIND ACCE PTANCE WITH THE AO, IT DID, I.E., IN PRINCIPLE, BY THE LD. CIT(A). IN HIS VIEW, HOWEVER, IT COULD NOT BE SAID THAT THE ASSESSEE HAD THEREBY EXPLAINED THE ENTIRE SHORTFALL (IN PHYSICAL STOCK), WHICH HE ESTIMATED AT 35% OF THE ALLEGED EXCESS BOO K-STOCK (36,400 MT). THE BALANCE 65% (I.E., 23,660 MT) REMAINED UNEXPLAINED, IMPLYING ITS UNACCOUNTED SALE. THE AO HAD ALSO GONE WRONG IN VAL UING THE SAME AT RS. 3300 PMT, WHICH HE REDUCED TO RS. 2800 PMT ON THE P REMISE THAT THE SALE RATE WOULD VARY OVER DIFFERENT GRADES OF IRON. AGAIN, IT WAS TRITE THAT THE STOCK WOULD BE VALUED AT COST, SO THAT THE ESCAPEMENT OF INCOME FROM TAX WAS THE EXCESS OF THE SALE VALUE OVER COST. APPLYING THE OB TAINING GROSS PROFIT RATE (50.69%) ON THE SAID OUT-OF-BOOKS SALES, I.E., RS. 662.48 LACS (23,660 MT X RS. 2800 PMT), HE, ACCORDINGLY CONFIRMED THE ADDITI ON FOR . 335.81 LAKHS, DELETING THE BALANCE ADDITION OF RS. 2646.04 LACS ( RS. 2981.85 LACS RS. 335.81 LACS). AGGRIEVED, BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL. I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 7 THE RESPECTIVE CASES 3.1 BEFORE US, THE ASSESSEES CASE, REPRESENTED BY SH. RAHUL BARDIA, WAS THAT IT WAS NOT DISPUTING THE REPORTS BY THE TECHNI CAL AGENCIES, I.E., THE IBM AND MECL, BUT THE INFERENCE/S DRAWN BY THE REVENUE AUTHORITIES THERE-FROM. THE AO HAD, ON RECEIPT OF THE ASSESSEE'S REPLY DATE D 09/12/2016, CALLED FOR ITS COMMENTS THERETO FROM THE IBM, WHICH WAS RESPONDED TO BY THE LATTER ONLY ON 12/1/2017, EVEN AS THE ASSESSMENT, GETTING TIME BAR RED ON 31/12/2016, WAS ACCORDINGLY PROCEEDED WITH BY THE AO, FRAMING ASSES SMENT/S ON 23/12/2016. THE ASSESSMENT ORDER/S IS, THUS, SANS THE CONSIDERATION OF THE SAID REPLY, OR, IN ANY CASE, THE IBMS COMMENTS THERETO, WHILE THAT BY THE LD. CIT(A) IS UPON CONSIDERING THE SAME. THE FIRST APPELLATE AUTHORITY HAD, HOWEVER, GONE WRONG IN ACCEPTING THE ASSESSEES EXPLANATION IN PART. TH E ASSESSEE HAD SINCE 2008 BEING ACCUMULATING BOTH WASTE AND SUBGRADE MATERIAL , WHICH COULD NEITHER BE DISPOSED OF NOR PROCESSED FURTHER AND WHICH WOULD ALSO BE APPARENT FROM THE MONTHLY RETURNS BEING FILED WITH THE OFFICE OF THE REGIONAL CONTROLLER OF MINES, JABALPUR, AND HAD THEREFORE TO BE USED FOR P IT-FILLING, ETC. IT IS IN FACT ON ACCOUNT OF THIS, I.E., THE EXTENSIVE USE OF OVERBUR DEN (TOP SOIL), WASTE, AND OTHER SUBGRADE MATERIAL FOR THE PURPOSE BY THE ASSE SSEE OVER THE YEARS, THAT THE IBM DID NOT ESTIMATE THE EXCAVATION BY THE ASSESSEE TO DATE THROUGH THE VOLUMETRIC EXERCISE, WHICH THE REVENUE HAD REQUIRED IT TO, RESTRICTING ITS ENGAGEMENT TO AN ASSESSMENT OF THE INVENTORY AT THE SITE BY, AGAIN, VOLUMETRIC EXERCISE, THE WEIGHT OF DIFFERENT DUMPS BEING WORKE D OUT ON THE BASIS OF THE BULK DENSITY (AS PER THE APPROVED MINING PLAN). IT WAS ONLY RECENTLY THAT A TECHNOLOGY HAD BEEN DEVELOPED AND MADE COMMERCIALLY VIABLE, ENABLING A COST-EFFECTIVE RETRIEVAL OF IRON (AND OTHER MINERAL S) FROM THE LOW-GRADE MATERIAL (I.E., WITH IRON RATIO BELOW 50%). THE ASS ESSEE HAD ACCORDINGLY APPLIED FOR PROCESSING OF SUCH MATERIAL IN 2012, FO R WHICH SANCTION WAS ACCORDED VIDE THE APPROVED MINING PLAN ON 28/5/2013 (PB-2, PG. 157)(MP-2). I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 8 A BENEFICIATION PLANT HAD ACCORDINGLY BEEN SET-UP B Y SSI, IN PROGRESS AT THE TIME OF SEARCH, IN DECEMBER, 2014, TO WHICH SUB-GRA DE MATERIAL WAS BEING SOLD SINCE JANUARY, 2015. THIS WAS AS THE BENEFICIA TION PROCESS HAD POLLUTION ISSUES, AND WHICH COULD NOT THEREFORE BE INSTALLED BY THE ASSESSEE-FIRM ITSELF; ITS SITE BEING LOCATED CLOSE TO THE NATIONAL HIGHW AY. PRIOR THERETO, AND EVEN SUBSEQUENT THERETO, HOWEVER, THE LOW-GRADE MATERIAL CONTINUED TO BE USED FOR VARIOUS PURPOSES, VIZ. FILLING OF DUMPS; ROADS; PIT S AND RAMPS; RETAINING WALL, WHICH IS A CONTINUOUS ACTIVITY, WITH IN FACT THE LO W-GRADE MATERIAL BEING REGULARLY SHOWN IN THE MONTHLY RETURNS UNDER THE HE AD DUMP WORKINGS. COMPLETE RECORDS ARE AVAILABLE FOR THE MATERIAL SOL D TO SSI FOR FURTHER PROCESSING BY IT, AS ALSO WITH SSI. IT IS ONLY THER EAFTER, I.E., JANUARY, 2015 (THE MONTH FROM WHICH SSI COMMENCED OPERATIONS) ONWARDS, THAT THE SAID MATERIAL COULD, UPON INCURRING COST, BE CONVERTED INTO SALEA BLE MATERIAL, THE PRICE OF WHICH IS VERY SENSITIVE TO THE IRON (FE) RATIO, FET CHING FOR LOWER GRADES THEREOF IN THE IRON ORE A PRICE AS LOW AS RS. 400 PMT. THE MINERAL CONTENT (VIZ. IRON, MANGANESE AND LATERITE ORES) IN THE VARIOUS STOCKS, THUS, HAS TO BE CONSIDERED WHILE COMPARING THE BOOK-STOCK WITH THE PHYSICAL ST OCK, AND WHICH HAS NOT BEEN. THIS CONSTITUTES THE MAJOR FLAW IN THE AOS W ORKING, WHICH THOUGH HAS BEEN SET RIGHT, ACCEPTING THE ASSESSEES CLAIM, BY THE LD. CIT(A). IT IS BY TAKING THE IRON ORE RATIO IN THE SUBGRADE MATERIAL THAT TH E SAME WORKS TO 2,08,862.655 MT, RESULTING IN, THUS, A SURPLUS, I.E., AN EXCESS BOOK-STOCK, WHICH (EXCESS) IS AGAIN ONLY APPARENT, AND STANDS SUFFICIENTLY EXP LAINED BY THE ASSESSEE PER ITS REPLY DATED 15/12/2016 (PB-2, PGS. 1-21). THE SAID EXCESS, HE WOULD CONTINUE, IS ON ACCOUNT OF THE NON-ADJUSTMENT OF TH E WASTE/SUBGRADE MATERIAL TOWARD FILLING OF PITS, ROADS, RAMPS, RETAINING WAL L, REFERRED TO EARLIER. SURELY, THE SAME CAN ONLY BE BROADLY ASSESSED, AND NOT TO A PRECISE QUANTITY, I.E., DUE TO THE VERY NATURE OF THE EXERCISE. IN THIS REGARD, IT MAY BE RELEVANT TO STATE THAT AN INSPECTION OF THE ASSESSEES SITE WAS CARRIED OU T BY IBM IN JANUARY, 2014, I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 9 NOTING CERTAIN VIOLATIONS UNDER THE PROVISIONS OF T HE MINERAL CONSERVATION AND DEVELOPMENT RULES, 1988. VIDE ITS LETTER DATED 13/ 01/2014, IT WAS ACCORDINGLY ALLEGED BY IBM THAT THE MINING OPERATIO NS BY THE ASSESSEE WERE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE APPROV ED SCHEME, DETERMINING AN EXTRA EXCAVATION TO THE EXTENT OF 10 METRE DEPTH. T HE ASSESSEES MINING OPERATIONS WERE ACCORDINGLY SUSPENDED VIDE ITS ORD ER DATED 05/02/2014. THE MATTER, ON A COMPLAINT BEING FILED BY IBM, TRAVELLE D TO THE COURT OF THE MAGISTRATE, WHO WAS PLEASED TO ORDER THE RELEASE OF THE SUSPENSION UPON PAYMENT OF PENALTY OF .35,000 BY THE ASSESSEE (VIDE ORDER DATED 25/3/2014/PB-2, PGS.131-132). PER CONTRA, NO EXCAVA TION, I.E., WITH REFERENCE TO THE APPROVED MINING PLAN, APART FROM THAT CORRES PONDING TO 10 MTRS. DEPTH, WAS FOUND ON PHYSICAL INSPECTION CARRIED OUT ONLY A FEW MONTHS PRIOR TO THE DATE OF THE SEARCH. NEEDLESS TO ADD, THE SAID EXTRA EXCAVATION WAS FILLED-UP BY THE ASSESSEE, CONVEYING THE SAME TO IBM VIDE ITS L ETTER DATED 12/2/2014. THE ASSESSEE, IN SUPPORT OF ITS VARIOUS CLAIMS QUA USER OF SUB-GRADE MATERIAL/WASTE, FILED A CERTIFICATE FROM A TECHNICA L EXPERT (GEOLOGIST) (AT PB-2, PG. 139), JUSTIFYING THE ABSORPTION OF THE ENTIRE E XCESS OF 36,400 MT. THE LD. CIT(A), HOWEVER, DID NOT AND WITHOUT CITING ANY D EFINITE REASON/S, ACCEPT THE SAME. INASMUCH AS, HOWEVER, THE USER OF THE OVE RBURDEN/WASTE/LOW-GRADE MATERIAL FOR BACK-FILLING, ETC. WAS AN ADMITTED FAC T (REFER PARA 7.1.6 OF THE ASSESSMENT ORDER), HE ACCEPTED THE SHORT-FALL (IN T HE PHYSICAL STOCK), AS EXPLAINED, TO THE EXTENT OF 35%. THIS WAS CLEARLY A RBITRARY. FOR THE BALANCE 65% (23,660 MT), HE APPLIED THE GROSS PROFIT RATE D ISCLOSED BY THE ASSESSEE FOR THE CURRENT YEAR, ESTIMATING ITS SALE VALUE BY LOWERING THAT ADOPTED BY THE AO, TO RS. 2800 PMT, ON BEING SHOWN PRICE VARIABILI TY. HIS ACTION IN DOING SO IS WHOLLY UNTENABLE. NO CASE FOR AN ADDITION, TO AN Y EXTENT, IS MADE OUT. HE WOULD, ON A QUERY BY THE BENCH, CONFIRM THAT THE RE TURNS AGREE WITH THE BOOKS OF ACCOUNT, BASED AS THEY WERE ON THE RECORDS BEING MAINTAINED BY THE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 10 ASSESSEE-FIRM. HE COULD, HOWEVER, OFFER NO SATISFAC TORY EXPLANATION/ANSWER TO THE BASIS OF THE SALE RATE OF RS. 2800 PMT ADOPTED BY THE LD. CIT(A), WHOSE ORDER DOES NOT STATE ANY. 3.2 THE LD. CIT-DR, SH. MEENA, WOULD, ON THE OTHER HAND, SUBMIT, EQUALLY VEHEMENTLY, THAT THE ASSESSEE HAD NO CASE AND, IN F ACT, HAD BEEN ALLOWED UNWARRANTED RELIEF BY THE FIRST APPELLATE AUTHORITY . THE REPORTS BY THE GOVERNMENT AGENCIES, WHICH ARE TECHNICAL EXPERTS IN THE FIELD, SPECIFICALLY REQUISITIONED BY THE REVENUE, ARE NOT DISPUTED, EVE N AS CLARIFIED BY SH. BARDIA IN HIS PLEADINGS. WHERE, THEN, IS THE SCOPE FOR TAKING ANY DIFFERENT VIEW IN THE MATTER; THE PHYSICAL STOCK (AS DETERMINED BY IBM) AND BOOK-STOCK (AS PER THE ASSESSEES RETURNS) OF IRON-ORE, AND THUS T HE WIDE DIFFERENCE BETWEEN THEM, BEING ADMITTED ? IT IS A CLEAR CASE FOR APPLICATION OF SECTIONS 69 A/69B, WITH THE REVENUE IN FACT NOT EXTRAPOLATING THE DIFF ERENCE OVER THE PRECEDING YEARS, WHICH IN FACT IT OUGHT TO HAVE DONE, PARTICU LARLY GIVEN THE ASSESSEES HISTORY OF THE SEARCHES/SURVEYS IN THE PAST RESULTI NG IN DISCOVERY OF UNDISCLOSED INCOME/ASSETS. FURTHER, THERE HAS BEEN EXTRA/UNAUTHORIZED EXCAVATION, IN CONTRAVENTION OF THE MINING PLAN, DE TECTED ON PHYSICAL VERIFICATION BY IBM IN JANUARY, 2014, AGAIN ADMITTE D, LEADING TO THE SUSPENSION OF THE ASSESSEES MINING LICENSE BY THE REGIONAL CONTROLLER OF MINES (IBM). THE REVENUE HAD ALSO NOT TAKEN INTO AC COUNT THE DIFFERENCE/S IN THE STOCK OF LATERITE AND MANGANESE ORES, PERHAPS O N ACCOUNT OF NOMINAL VALUE/S THEREOF, WHICH NEVERTHELESS IT OUGHT TO HAV E ALSO INCLUDED. THE LD. CIT(A) SHOULD HAVE CORRECTED THESE ERRORS IN ASSESS MENT; HIS POWERS BEING COTERMINOUS WITH THE ASSESSING AUTHORITY, RATHER TH AN ACCEPTING THE ASSESSEES CASE. THE SUBGRADE DUMP, WHATEVER MAY BE ITS VALUE , HAS ALSO NOT BEEN TAKEN INTO ACCOUNT BY THE REVENUE. WHERE, THEN, IS THE QUESTION OF RECKONING THE IRON (FE) CONTENT THEREIN, AND THEN ADDING THE SAME TO THE STOCK OF THE FINISHED I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 11 GOODS ? THE ADDITIONAL BOOK-STOCK OF SUBGRADE MATERIAL, I .E., 1,49,128.57 MT (1,92,400 MT - 43,271.43 MT), COULD BE EITHER USED FOR LAYING ROADS; RAMPS; PIT FILLING; RETAINING WALL, WHICH IS THE ADMITTED POSITION, OR SOLD OUT-OF-BOOKS. THE LATTER, HOWEVER, IS THE ONLY INFERENCE ARISING QUA THE ADDITIONAL FINISHED STOCK INASMUCH AS THE SAME IS ADMITTEDLY NOT USED F OR ANY OTHER PURPOSE. IT IS ACCORDINGLY THIS LATTER COURSE (ALSO DETECTED DURIN G SEARCH IN THE FORM OF TP DATED 15.10.2014 ON WHICH WEIGHT HAD NOT BEEN RECOR DED, ADMITTED BY SHRI GHANSHYAM PATEL, THE FIRMS MINING MANAGER), WHICH THE LD. CIT(A) HAS ESTIMATED AT 65% OF THE ADMITTED SHORTFALL OF 36,40 0 MT, I.E., 23660 MT, QUA FINISHED STOCK. FURTHER ON, THE VARIOUS PRODUCTION COSTS HAVING BEEN ALREADY FULLY ABSORBED IN THE BOOKS, IT IS THE ENTIRE SALE VALUE THAT WOULD STAND TO BE ADDED, RATHER THAN ONLY THE GROSS PROFIT THEREON. 3.3 THE LD. COUNSEL, SH. BARDIA, WOULD, IN REJOINDE R, SUBMIT THAT THE CONSIDERATION OF IRON ORE COMPONENT AT 85% IN THE S UB-GRADE MATERIAL IS AS PER THE APPROVED MINING PLAN AND, IN FACT, ENDORSED BY IBM IN ITS REPORTS. IN ITS REPORT DATED 04.12.2014, REPRODUCED (IN THE SCANNED FORM) AT PAGES 9-11 OF THE ASSESSMENT ORDER, THE IRON (FE) RECOVERY IN THE SUB-GRADE DUMPS (4 IN NUMBER), QUANTIFIED AT 43,271.43 MT, HAS ACCORDINGL Y BEEN TAKEN BY IT AT 36,780.71 MT (AT PG. 11). THE ASSESSEE IS THEREFORE JUSTIFIED IN INCLUDING THE IRON ORE COMPONENT OF THE SUB-GRADE DUMP IN COMPARI NG THE BOOK-STOCK WITH THE PHYSICAL STOCK. TWO, SH. GHANSHYAM PATEL, THE M INING MANAGER, RETRACTED HIS STATEMENT/S DATED 16.10.2014 AND 17.10.2014 VID E A SWORN AFFIDAVIT DATED 04.10.2016 (PB-2, PG. 182), WHICH WAS FURNISHED BEF ORE THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IT WAS EXPLAINED THA T THE TP DATED 15.10.2014 WAS FOR TRANSPORTATION OF CONSTRUCTION MATERIAL, PU RCHASED BY SSI, THERETO, WHICH WAS NECESSITATED DUE TO THE SAID MATERIAL HAV ING BEEN DUMPED (BY THE SUPPLIER) NEAR KEOLRI MINE SITE, AS THERE WAS NO AP PROACH ROAD TO THE SITE OF I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 12 SSI. ON QUERY, HE CONFIRMED THE VALUATION OF THE SU B-GRADE DUMP STOCK (AS AT THE YEAR-END) TO BE NIL, AS THE ENTIRE EXCAVATION/P RODUCTION COST HAD BEEN ALREADY ABSORBED IN THE RESPECTIVE YEARS, I.E., TOW ARD PRODUCTION OF FINISHED GOODS AND, FURTHER, THAT ITS SALE VALUE WAS AT . 400 PMT. HE WOULD THOUGH ADD THAT BOTH THE AO AND THE LD. CIT(A) HAD NOT CON SIDERED THE ASSESSEES ALTERNATE PLEA, MADE WITHOUT PREJUDICE, I.E., THAT INASMUCH AS THE ENTIRE EXCAVATION COST, AS INCURRED, HAD ALREADY BEEN ABSO RBED (IN VALUING THE BOOK- STOCK OF FINISHED GOODS), THE EXCESS PHYSICAL STOCK THEREOF, IRRESPECTIVE OF ITS QUANTUM, WOULD STAND TO BE VALUED AT NIL. THIS IS A S THE VALUE OF THE EXCESS STOCK IS TO BE AT COST, REPRESENTING THE MONEY EXPE NDED/INVESTED BY THE ASSESSEE ON ITS ACQUISITION/PRODUCTION. 3.4 THE HEARING, WHICH WAS SPREAD OVER TWO DAYS, WI TH THE BENCH MAKING SEVERAL QUERIES, WAS CLOSED AT THIS STAGE, REQUIRIN G THE PARTIES TO FURNISH A SYNOPSIS OF THEIR ARGUMENTS, WHICH WERE SUBMITTED B Y THE REVENUE AND THE ASSESSEE ON 16/12/2019 AND 30/12/2019 RESPECTIVELY (COPY ON RECORD). THE ASSESSEE, ENCLOSED ALONG WITH, A COPY OF THE INDIA GAZETTE NOTIFICATION DATED 16/10/2009, COPY OF WHICH STANDS FURNISHED BY IT BE FORE THE LD. CIT(A) AS ANNEXURE 1 TO ITS REPLY DATED 23/11/2017 (REPRODUC ED AT PARA 6.2.2 OF THE IMPUGNED ORDER). THE ASSESSEE ALSO FURNISHED THE MO NTHLY RETURN (IRON ORE) FOR JUNE, 2014, MISSING IN THE PAPER-BOOK (PB). THE SAM E WERE TAKEN ON RECORD. THE MINING PLANS, REFERRED TO BY THE ASSESSEE DURIN G HEARING, BEING VOLUMINOUS, WERE ALSO RETAINED FOR ANY REFERENCE TH ERETO THAT MAY BE REQUIRED WHILE ADJUDICATING THE APPEALS. DISCUSSSION & ANALYSIS 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 13 FORMULATION OF THE ISSUES 4.1 AS WOULD BE APPARENT FROM THE FOREGOING, THE IS SUES ARISING FOR ADJUDICATION ARE AS UNDER: [ A). WHETHER ANY ADDITION UNDER SECTION 69A OR, AS T HE CASE MAY BE, S. 69B, I.E., TOWARD EXCESS STOCK OF FINISHED GOODS OF IRON ORE (MANGANESE ORE) IS MAINTAINABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I.E., IN PRINCIPLE? B). WHETHER, IN ADDITION TO THE ADDITION TOWARD UN EXPLAINED PHYSICAL STOCK, OR EVEN OTHERWISE, ANY ADDITION TOWARD EXCESS BOOK-STO CK OF ANY SALEABLE MATERIAL IS CALLED FOR IN THE FACTS AND CIRCUMSTANC ES OF THE CASE? C). THE VALUE AT WHICH THE ADDITION/S, IF ANY, REFE RRED TO AT (A) AND/OR (B) ABOVE, IS TO BE MADE. THESE ARE ALSO THE THREE ISSUES ARISING OUT OF THE SEVERAL GROUNDS ASSUMED BY THE PARTIES BEFORE US. 4.2 AT THE OUTSET WE NOTE THAT THE MOOT QUESTION AR ISING IS AS TO WHAT CONSTITUTES FINISHED (SALEABLE) IRON ORE, I.E., ITS DEFINING ATTRIBUTE, DISTINGUISHING IT FROM THE SUBGRADE MATERIAL; THE L ATTER BEING NOT READILY SALEABLE, AND BEING NOW (SINCE JANUARY, 2015) SOLD TO THE BENEFICIATION PLANTS AT A FRACTION OF THE PRICE FETCHED FOR THE FINISHED STOCK. WE SAY SO AS WHILE FINISHED-GOOD IS ON PHYSICAL STOCK-TAKING FOUND T O BE IN EXCESS, THE SUB- GRADE FOUND SHORT (I.E., AT 43,271.43 MT, AS AGAIN ST A BOOK-STOCK OF 1,92,400 MT), SO THAT CORRECT CATEGORIZATION BECOMES CRUCIAL . HOWEVER, WE OBSERVE NO DISPUTE EITHER AS REGARDS THE QUANTITY OF THE IRON ORE FOUND IN VARIOUS DUMPS OR AS TO ITS CLASSIFICATION (AS FINISHED-GOOD OR SUBGR ADE). THE PROCESSED IRON ORE IN DUMPS, QUANTIFIED AT 1,35,681.6 MT (BY IBM), WHI CH QUANTITY IS NOT IN DISPUTE, WOULD STAND TO BE CATEGORIZED AS FINISHED IRON ORE, AS DONE BY IBM (& ADOPTED BY THE REVENUE), CONSIDERING THAT THE GR ADE THEREOF VARIES BETWEEN 50.12% TO 54.32% (REFER PARA 2), WHICH AGREES WITH THE CONSIDERATION BY THE ASSESSEE OF THAT WITH GRADE BELOW 50% AS SUBGRADE, COUPLED WITH THE FACT OF I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 14 THE ASSESSEE PAYING ROYALTY ON THE SALE OF FINISHED GOODS UNDER THE GRADE CLASS BELOW 55% (REFER PARAS 2, 3.1). THE QUANTITY OF L ATERITE AND MANGANESE ORES HAS NEITHER BEEN PHYSICALLY TAKEN NOR, CONSEQUENTLY , COMPARED. HOW CAN, THEN, EVEN AS LD. CIT-DR ARGUES, THE AO BE FAULTED WITH ? 4.3 BEFORE WE MAY EXAMINE THE ASSESSEES CASE, IT W OULD BE RELEVANT TO, AND WE ACCORDINGLY BEGIN BY, DELINEATING THE MINING PROCESS AS EXPLAINED BY THE ASSESSEE PER ITS VARIOUS SUBMISSIONS BEFORE TH E REVENUE, AS WELL AS DURING HEARING, AND ALSO CONSIDER THE MANNER OF ITS REPOR TING. THE EXCAVATION, AFTER REMOVAL OF THE TOPSOIL (OVERBURDEN/OB), IS FIRSTLY PLACED AT THE PIT-HEAD. THIS IS ALSO CALLED ROM (RUN ON MILL), AND IS REPORTED I N THE MONTHLY RETURNS UNDER THE SECTION OPEN CAST WORKING. THE MATERIAL, AFTE R BEING DUMPED AT A SEPARATE PLACE AT THE SITE, IS SCREENED AND CRUSHED WITH A MOBILE CRUSHER/SCREENER, AND AGAIN SCREENED, AND THEN SORT ED MANUALLY. THE OUTPUT IS IN THE FORM OF FINES (POWDER FORM, I.E., PARTICLE SIZE: 0-10 MM), ARISING ON FIRST SCREENING; AND LUMPS (GRANULES/PEBBLES OF D IFFERENT SIZES: 10-40 MM), AND REPORTED ACCORDINGLY, GRADE-WISE, AND KEPT IN S EPARATE DUMPS. THIS IS THE SALEABLE IRON ORE, THE IRON GRADE OF WHICH IN THE C ASE OF KEOLARI MINES, AS EXPLAINED, VARIES BETWEEN 50%-55% AND, ACCORDINGLY, REPORTED UNDER THE GRADE CLASS BELOW 55% IN THE MONTHLY (ANNUAL) RET URNS. THIS SALEABLE PRODUCTION, WHICH IS ALMOST EQUALLY DIVIDED BETWEEN LUMPS AND FINES, HOWEVER, EXTENDS TO ABOUT 20% OF THE TOTAL PRODUCTI ON. WHAT REMAINS, I.E., THE BALANCE 80%, IS THE LOW-GRADE (OR SUB-GRADE) MATERI AL, I.E., WITH IRON GRADE <50%, WHICH IS STOCKED SEPARATELY IN/AS WHAT ARE CA LLED SUB-GRADE DUMPS, CATEGORIZED AS DUMPED WORKINGS IN THE MONTHLY REP ORTS. FURTHER, AS AFORE- NOTED, THE IRON ORE RATIO, AS PER THE MINING PLAN 2 (FOR 201314 TO 201718) IS 85%, THE BALANCE 15% BEING LATERITE AND MANGANESE O RES. THE MONTHLY REPORT I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 15 FOR OCTOBER, 2014 FOR IRON ORE (AT PB-2, PGS. 55-57 ), TO WHICH OUR ATTENTION WAS ALSO DRAWN DURING HEARING, IS AS UNDER: TABLE 3 PART- II (PRODUCTION, DESPATCHES AND STOCKS (UNIT OF QUANTITY IN TONNES) 1. TYPES OF ORE PRODUCED: (TICK MARK, WHICHEVER IS APPLICABLE) A) HEMATITE HEMATITE B) MAGNETITE 2. PRODUCTION AND STOCK OF ROM ORE AT MINE-HEAD CATEGORY OPENING STOCK PRODUCTION CLOSING STOCK A) OPEN CAST WORKING 44800.00 1500.00 44800.00 B) DUMP WORKINGS 192400.00 NIL 192400.00 3. GRADE-WISE PRODUCTION, DESPATCHES, STOCK AND EX-MIN E OF PROCESSED ORE: GRADES (% OF FE CONTENT) OPENING STOCK AT MINE HEAD PRODUCTION DISPATCHES FROM MINE HEAD CLOSING STOCK AT MINE-HEAD EX-MINE PRICE (RS./MT) I.) LUMPS :- A) BELOW 55% 17724.885 NIL 960.725 16764.16 950 B) 55% TO BELOW 58% NIL NIL NIL NIL NIL C) 58% TO BELOW 60% NIL NIL NIL NIL NIL D) 60% TO BELOW 62% NIL NIL NIL NIL NIL E) 62% TO BELOW 65% NIL NIL NIL NIL NIL F) 65% AND ABOVE NIL NIL NIL NIL NIL II) FINES:- G) BELOW 55% 30821.255 1500.00 3762.760 28558.495 950 H) 55% TO BELOW 58% NIL NIL NIL NIL NIL I) 58% TO BELOW 60% NIL NIL NIL NIL NIL J) 60% TO BELOW 62% NIL NIL NIL NIL NIL K) 62% TO BELOW 65% NIL NIL NIL NIL NIL L) 65% AND ABOVE NIL NIL NIL NIL NIL III) CONCENTRATES NIL NIL NIL NIL .. 4. DETAILS OF DEDUCTIONS USED FOR COMPUTATION OF SALE PRICE (EX-MINE)(RS./TONNES) DEDUCTION CLAIMED UNIT (RS. TONNE) REMARKS A) COST OF TRANSPORTATION (INDICATE LOADING STATION AND DISTANCE FROM IN 200 NONE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 16 REMARKS) B) LOADING AND UNLOADING CHARGES 300 NONE C) RAILWAY FREIGHT IF APPLICABLE (INDICATE DESTINATION AND DISTANCE) NIL NONE D) PORT HANDLING CHARGES/EXPORT DATE (INDICATE NAME OF PORT) NIL NONE E) CHARGE FOR SAMPLING AND ANALYSIS 50 NONE F) RENT FOR THE PLOT AT STOCKING YARD NIL OWN G) OTHER CHARGES (SPECIFY CLEARLY 400 SEPARATING MATERIALS & DEWATERING EXPENDITURE TOTAL (A) TO (G) 950 NONE 5. SALES/DESPATCHES EFFECTED FOR DOMESTIC CONSUMPTION AND FOR EXPORTS: GRADE NAME OF DESPATCH (INDICATE WHETHER FOR SALE OR CAPTIVE CONSUMPTION OR EXPORT) FOR DOMESTIC CONSUMPTION FOR EXPORT CONSIGNEE NAME AND REGISTRATION NUMBER AS ALLOTTED BY INDIAN BUREAU OF MINES TO THE BUYER # # QUANTITY SALE VALUE COUNTRY QUANTITY F.O.B. VALUE (RS.) BELOW 55% FINES BELOW 55% LUMPS DOMESTIC SALE SAGAR STONE INDS . ASHTVINAYAK TRD. IBM/12676/2012 SUN FLAG IBM/560/2011 3762.76 960.725 RS. 1100 PER TONN RS. 3050 PER TONN NONE NIL NIL ## CONSIGNEE NAME AND REGISTRATION NUMBER AS ALLOTT ED BY THE INDIAN BUREAU OF MINES TO THE BUYER (TO INDICATE SEPARATELY IF MORE THAN ONE BUYER) FOR THE TOP FIVE DESPATCHES IN TERMS OF QUANTITY FOR THE REMAINING CONSOLIDATED FI GURE SHALL BE REPORTED WITH DETAILS OF DESPATCHES AS ANNEXURE. NOTE: PLACE: JABALPUR SIGNATURE: SD/- DATE: 24/12/2014 NAME IN FULL: G. PATEL DESIGNATION: OWNER/AGENT/ MINING/ENGINEER/MANAGER I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 17 (*) PART-I OF THE RETURN CONTAINS THE ASSESSEES (A ND ITS MINES) PARTICULARS, AND IS THEREFORE NOT REPRODUCED. THE GRAPHIC DEPICTION OF THE PROCESS, AS EXPLAINED, WOULD BE AS UNDER: TABLE 4A EXCAVATION (100) (ROM) HEMATITE (85) LATERITE (10) MANGANESE (5) (SOLD AS SUCH) (SOLD AS SUCH) FINES (8.5) SEMI-PROCESSED (76.5) (SALEABLE) (*) LUMPS (8.5) LOW-GRADE (68)(SOLD AS SUB-GRADE MAT ERIAL TO BENEFICIATION PLANTS) (SALEABLE) (*) (*) SOLD TO PELLETAIZATION PLANTS. THUS, WHILE THE MATERIAL TRAVELS FROM THE PIT-HEAD TO STACKS TO FINISHED GOOD AND SUB-GRADE DUMPS, IN THE REPORT THE PRODUCTION I S TAKEN DIRECTLY FROM THE RAW MATERIAL STAGE (OPEN CAST WORKING) TO FINISH ED GOODS, LEAVING THE QUANTITY IN THE SUB-GRADE DUMP, BEING REPORTED UNDE R THE HEAD DUMP WORKINGS, UNDISTURBED, EXCEPT WHERE THERE IS AN AC CRETION THERETO. THIS ALSO EXPLAINS WHY THE RAW MATERIAL IS CONSTANT, EXCEPT W HERE PRODUCTION FOR THE MONTH COMES OUT OF THE EXISTING ROM AND NOT FROM FR ESH EXCAVATION. MONTHLY REPORTS FOR JUNE TO OCTOBER, 2014, PLACED O N RECORD (PB-2, PGS. 22- 66), DID NOT CONTAIN THE REPORT FOR JUNE, 2014 (FOR IRON ORE), BUT FOR NOVEMBER, 2014 INSTEAD, AND WAS THEREFORE PLACED ON RECORD. T HE PRODUCTION DATA FOR THE PERIOD JUNE TO NOVEMBER, 2014, AS REPORTED, IS AS U NDER: I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 18 TABLE 4B PRODUCTION/MONTH (OF 2014) JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER TOTAL (MT) LUMPS 5000 (2775) 8000 8000 - (3050) - (3050) 1000 (2000) 22,000 FINES 15000 (975) 12000 (1750) 12000 (1750) 2000 (1100) 1500 (1100) 1 500 (400) 44,000 TOTAL 20000 20000 20000 2000 1500 2500 66000 NB: QTY. IN MT. FIGURES IN BRACKETS REPRESENT THE R EPORTED SALE RATE IN RS./MT; SALE QUANTITY IS NOT STATED IN THE TABLE. THE ENTIRE PRODUCTION FOR THE MONTHS OF JUNE TO NOV EMBER, 2014 IS OF IRON ORE, SAVE OF LATERITE ORE, AT 500 MT FOR JUNE, 2014 AND, FURTHER, IN THE FORM OF LUMPS AND FINES. THE IRON ORE PRODUCED DURING O CTOBER & NOVEMBER, 2014 IS ENTIRELY FINES, AT 1500 MT EACH, SOLD AT 3762. 760 MT (TO SSI) AT RS.1100 PMT. THE SALE UNDER THE LUMPS CATEGORY IS TO THE PELLET PLANTS, AT RATES VARYING FROM RS. 2000 PMT TO RS. 3050 PMT. THE ACCR ETION TO THE STOCK OF SUB- GRADE, AGAIN IN NO PARTICULAR RATIO, IS ONLY FOR JU LY & AUGUST, 2014, AT 10,000 MT EACH, FOR WHICH PERIOD THE IRON ORE PRODUCTION I S AT 40,000 MT. IT IS THUS CLEAR THAT: A) THE PRODUCTION MAY BE OF IRON ORE ONLY, I.E., WI THOUT ANY WASTE GENERATION, OR OF THE SUB-GRADE MATERIAL, AS FOR THE MONTHS OF JUNE, SEPT. TO NOV., 2014; B) THE IRON ORE PRODUCTION FROM KEOLARI MINES IS OF LESS THAN 55% GRADE, THOUGH FALLS UNDER TWO CATEGORIES, LUMPS AND FIN ES, VARYING LARGELY IN THEIR SALE VALUES, WHICH ALSO VARY DRASTICALLY WITH IN THE SAME CATEGORY. THIS COULD NOT BE WITHOUT SOME BASIS ; C) THE PRODUCTION OF MANGANESE AND LATERITE ORES IS NOT A CONCOMITANT OF THE IRON ORE PRODUCTION; IS OF NOMINAL QUANTITY (AND VA LUE), WITH NO SALES FOR THE MONTHS OF JUNE TO OCTOBER, 2014. WHY, IT IS NOT CLEAR, OR UNDERSTOOD, SHOULD THE ROM CONTINUE TO BE NOT PROCESSED; IN FACT, TO ANY EXTENT, TO YIELD FINISHE D GOODS (FG) ? THIS IS ANY I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 19 FIRM WOULD ORDINARILY CONSUME ITS EXISTING RAW STO CK FOR PRODUCTION, RATHER THAN SETTING IT ASIDE & ACQUIRING FRESH STOCK FOR T HE PURPOSE. WHY, AGAIN, SHOULD NOT THE SUB-GRADE MATERIAL, WHICH ARISES ON PHYSICALLY PROCESSING (CRUSHING, SCREENING AND SORTING) THE RAW STOCK, BE ING, AS STATED, AT ABOUT 80% OF THE IRON ORE PROCESSED, GET GENERATED AND IN T HAT RATIO, ALONG WITH THE REGULAR FINISHED STOCK PRODUCTION (WHICH IS AT 66,0 00 MT DURING THE PERIOD FOR WHICH THE REPORTS ARE AVAILABLE)? THE NON-GENERATIO N OF WASTE IS UNDERSTANDABLE IN THE ABSENCE OF ANY MENTION THEREO F IN THE CURRENT MINING PLAN (FOR 2013-14 TO 2017-18)(MP-2). THE LATERITE A ND MANGANESE ORE PRODUCTION SHOULD, AGAIN, BE ABOUT 90% OF THE TOTAL FINISHED IRON ORE PRODUCTION, AND IN THE RATIO OF 2:1, I.E., IN TERMS OF THE MINING PLAN ITSELF, WHILE IT IS ONLY AT 500 MT (I.E., AS AGAINST AN IRO N ORE PRODUCTION OF 66,000 MT). THE PRODUCTION (OF IRON ORE) IS SALEABLE, AND WHICH POSITION, BESIDES BEING BORNE OUT BY THE RECORD, AGREES WITH THE ASSE SSEES CASE OF IRON ORE BEING SALEABLE IN THE GRADE CLASS 50%-55%, WITH THA T BELOW 50% BEING LIABLE TO BE REGARDED AS SUB-GRADE; THE ASSESSEE PAYING RO YALTY ON SALE OF FINISHED GOODS UNDER THE GRADE CLASS BELOW 55% (ALSO SEE P ARA 4.2, TABLE 3). 4.4 AT THIS STAGE WE MAY DIGRESS TO ADDRESS THE QUE STION AS TO IF THE SALEABLE IRON ORE, AS PHYSICALLY FOUND, IS TO BE VALUED AT C OST, AS BEING ALTERNATIVELY CONTENDED BY THE ASSESSEE, OR AT ITS SALE (NET REAL IZABLE) VALUE (REFER PARA 1.3; Q.(C) AT PARA 4.1 ABOVE). THIS ASSUMES SIGNIFICANCE AS WHERE THE PHYSICAL STOCK OF IRON ORE IS FOUND TO BE IN EXCESS OF THE B OOK-STOCK THEREOF, AS THE REVENUE CONTENDS, THE SAME MAY BE OF LITTLE OR NO C ONSEQUENCE, GIVEN THAT THE ONLY COST SUFFERED TOWARD THE SAME, BEING A RESOURC E EXTRACTED FROM EARTH, IS ITS EXCAVATION COST, AND WHICH MAY BE NOMINAL IN C OMPARISON TO ITS SALE VALUE. IN FACT, EVEN TOWARD THE SAME, THE ASSESSEE CONTENDS TO HAVE ALREADY INCURRED AND CLAIMED THE COST AGAINST ITS DISCLOSE D PRODUCTION, SO THAT NO I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 20 UNEXPLAINED COST STANDS INCURRED, SO AS TO RESULT I N ANY ADDITION IN ASSESSMENT QUA THE UNDISCLOSED PRODUCTION. IN OUR VIEW, THE SALE (OR NET REALIZABLE) VALUE OF SUCH STOCK IS LIABLE TO BE ADDED, I.E., QUA THE PHYSICAL STOCK, TO THE EXTENT IT IS IN EXCESS OF THE BOOK-STOCK. ITS COST OF EXCAVAT ION IS, FIRSTLY, AT 50% (APPROX.) OF THE SALE VALUE, GIVEN THE DISCLOSED GR OSS PROFIT RATE OF 50.69%, WHICH PROFIT IS IN FACT HIGHER THAN THAT FOR THE PR ECEDING YEARS. HOWEVER, THE ASSESSEE DOES NOT ADMIT OF ANY EXCESS STOCK AT ANY STAGE, WHICH THUS CONTINUES TO REMAIN OUT-OF-BOOKS (ACCOUNTS). THUS, WHILE THE ASSESSEE HAS THIS STOCK AS ON 31.10.2014, I.E., WHERE SO, THE SAME IS NEITHER TAKEN INTO ACCOUNT DURING THE YEAR, NOR AT THE YEAR-END, SO THAT ITS VALUE ESCAPE S BEING TAKEN INTO ACCOUNT AND, THUS, IN COMPUTING INCOME. THE COST (OF EXCAVA TION & PROCESSING) THEREOF, EVEN AS ARGUED BY THE ASSESSE ITSELF, STAN DS ALREADY ABSORBED AS PART OF THE REGULAR COST OF PRODUCTION. THIS ASPECT IS IN F ACT IRRELEVANT. EVEN IF REGARDED AS INCURRED SEPARATELY, I.E., OUT-OF-BOOKS , INASMUCH AS THERE IS NOTHING TO SHOW THAT THE REGULAR PER UNIT COST OF P RODUCTION IS INFLATED TO ABSORB THE COST OF THE UNDISCLOSED PRODUCTION, SUCH COST, WHICH STANDS TO BE INCURRED PRIOR TO ANY REALIZATION IN RESPECT OF THE EXCESS PHYSICAL STOCK, WOULD STAND TO BE DISALLOWED UNDER SECTION 69C, PER PROVISO THERETO. AS SUCH, EITHER WAY, THE ENTIRE SALE (NET REALIZABLE) VALUE OF THE STOCK, TO THE EXTENT IN EXCESS OF BOOK STOCK, IS LIABLE TO BE ADDED TO THE ASSESSE ES INCOME FOR THE RELEVANT YEAR. THE SECOND ASPECT THAT NEEDS TO BE CLARIFIED IN THI S REGARD IS IF, ON THE OTHER HAND, IT IS, UPON EXAMINATION, FOUND THAT THE BOOK-STOCK (OF FINISHED IRON ORE) IS IN EXCESS (VIS-A-VIS THE PHYSICAL STOCK), A S INFERRED BY THE LD. CIT(A), WHETHER ANY ADDITION TOWARD UNDISCLOSED PROFIT IS C ALLED FOR AND, RATHER, ALSO IF IT IS THE ENTIRE SALE VALUE, AS CONTENDED BY THE LD . CIT-DR, WHICH IS TO BE ADDED. NO ARGUMENT TOWARD THIS STANDS RAISED BY THE ASSESSEES COUNSEL, SH. BARDIA, DURING HEARING; THE ASSESSEES CASE CONTEST ING THE IMPUGNED ORDER I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 21 BEFORE US BEING OF THE ARBITRARINESS IN THE LD. CIT (A)S ACTION IN PART- ACCEPTANCE OF ITS PLEA OF THERE BEING IN FACT NO E XCESS STOCK OF FINISHED IRON ORE AND, RATHER, THE SHORTFALL THEREIN AS ONLY APPA RENT, BEING FULLY EXPLAINABLE WHICH IS THE PRINCIPAL ISSUE ON THE MERITS OF THE C ASE. IN OUR VIEW, AN EXCESS BOOK-STOCK OF IRON ORE AS ON A PARTICULAR DATE WOUL D LEAD TO THE IMMINENT INFERENCE OF THE UNACCOUNTED REMOVAL (SALE) THEREOF UP TO THAT DATE. TRUE, IT COULD BE ARGUED THAT THE SAME STANDS DISPOSED OF IN BOOKS SUBSEQUENT TO 31.10.2014 (I.E., WITH REFERENCE TO WHICH DATE THE COMPARISON BETWEEN THE PHYSICAL AND BOOK-STOCK IS BEING MADE), SO THAT THE PROFIT ON ITS DISPOSAL STANDS DULY ACCOUNTED THROUGH SUCH SUBSEQUENT SALES , PRECLUDING ANY SEPARATE ADDITION, AS MADE BY THE LD. CIT(A). THERE CAN, HOW EVER, BE NO PRESUMPTION THAT THE SAID SUBSEQUENT SALE, ON WHICH IN FACT ROYALTY STANDS DULY SUFFERED (& PAID) , DOES NOT REPRESENT ACTUAL SALE, WHICH IT PURPORTS TO, AND PARTICULARLY CONSIDERING THAT THERE IS NO CESSATION OF PRODUCTIO N, WITH THE ASSESSEE RATHER CLAIMING THAT THE SAID PERIOD MARKS THE BEGINNING O F THE SEASON; THE PERIOD JUNE TO OCTOBER BEING AN OFF-SEASON DUE TO RAINS. W HY, ONE MAY ASK, WOULD THE ASSESSEE ACT INIMICAL TO ITSELF BY CONTINUING T O PERPETUATE AND, RESULTANTLY, FURTHER COMPOUND AN ERROR. BESIDES, THE SAID SALES CAN ONLY BE PRESUMED TO BE DULY RECEIPTED BY THE PURCHASER (BUYER), PRODUCING GOODS ON THAT BASIS, I.E., REPRESENT ACTUAL SALES. THERE IS NEITHER ANY CONTEN TION TOWARD NOR ANY BASIS FOR US TO PRESUME OTHERWISE. HERE IT NEEDS TO BE APPREC IATED THAT WHILE IN CASE OF A TRADING/MANUFACTURING CONCERN THE OUT-OF-BOOKS SA LE COULD, SAVE WHERE AND TO THE EXTENT THERE IS AN UNDERSTATEMENT OF YIELD, ARISE ONLY ON ACCOUNT OF, SIMILARLY, OUT-OF-BOOKS PURCHASE, IN CASE OF A MINI NG CONCERN, THE RAW STOCK IS TO BE EXCAVATED FROM EARTH AND DOES NOT REQUIRE ACQ UISITION, AT A COST, FROM ANY OUTSIDE AGENCY. THE EXCESS BOOK-STOCK, IMPLYING THE STOCK BEING SOLD OUT- OF-BOOKS AND, FURTHER, PRIOR TO THE DATE OF SEARCH, WOULD THUS HAVE INCOME IMPLICATION DESPITE THE SALE OF FINISHED GOODS IN T HAT (OR HIGHER) QUANTITY I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 22 SUBSEQUENT THERETO, WHICH (SALE), IN THE CASE OF A RUNNING CONCERN, IS A CONTINUOUS AFFAIR. THE NEXT QUESTION IS THE QUANTIFICATION OF THE INCO ME THAT HAS ESCAPED ASSESSMENT. THE SAME WOULD BE AT THE GROSS PROFIT ( OR TRADING MARGIN) OBTAINING. THE REASON IS SIMPLE. BEING PART OF THE BOOK-STOCK, I.E., PRODUCTION, DULY ACCOUNTED, WHICH REMAINS UNDISPOSED IN ACCOUNT S (THOUGH NOT FOUND PHYSICALLY), COST THEREOF WOULD STAND ALREADY BORNE AND DULY REFLECTED IN ACCOUNTS. THERE CAN BE NO PRESUMPTION OTHERWISE. WH Y, THE SAME WOULD STAND TO BE VALUED (AT COST) AS AT THE YEAR-END, SO THAT RECKONING IT AT ITS SALE VALUE FOR INCOME ADJUSTMENT, AS THE LD. CIT-DR SUBMITS, W OULD IMPLY A DOUBLE ACCOUNTING FOR COST AND, THUS, AN EXCESS ADDITION T O THAT EXTENT. THE INCOME TO BE ADDED WOULD THEREFORE BE THE GROSS PROFIT ON THE SALE VALUE OF THE EXCESS BOOK-STOCK, AND PRECISELY FOR THE SAME REASON WHICH THE LD. CIT-DR STATES FOR RECKONING THE SAME AT ITS SALE VALUE, I.E., A FULL ABSORPTION OF COST OF SUCH STOCK IN ACCOUNTS. YES, ONE COULD ARGUE THAT THERE IS NOT HING TO SHOW THAT THE ACTUAL SALE OF THE STOCK FOUND IN EXCESS, WHICH THEREFOR E IS PRIOR TO THE RELEVANT DATE (31/10/2014), HAS MATERIALIZED DURING THE CURRENT Y EAR. TRUE, BUT THEN THERE IS EQUALLY NOTHING TO SUGGEST OF THE SAID STOCK HAVING BEEN DISPOSED/SOLD DURING AN EARLIER YEAR. SANCTITY HAS TO BE ACCORDED TO THE CLOSED ACCOUNTS, I.E., IN THE ABSENCE OF ANY IMPUGNING MATERIAL FOR THOSE YEARS, AND THE STOCK OF FINISHED GOODS AS AT THE END OF THE IMMEDIATELY PRECEDING YE AR REGARDED AS A TRUE AND FAIR REPRESENTATION OF THE ACTUAL STATE OF AFFAIRS, SO THAT THE DIFFERENCE IN REPORTING THE ACTUAL SALES OCCURRED ONLY DURING THE CURRENT YEAR. THE ADDITION, AT THE GROSS PROFIT RATE AS OBTAINING FOR THE YEAR OF DETECTION OF EXCESS STOCK, I.E., THE CURRENT YEAR, FOR THAT YEAR, AS DONE BY T HE LD. CIT(A), IS THUS VALID, AND MEETS OUR APPROVAL, I.E., IN PRINCIPLE. HE HAS, HOW EVER, IN OUR VIEW, COMMITTED TWO ERRORS. ONE, THE GROSS PROFIT RATE, INASMUCH AS NO ROYALTY IS PAID ON THE OUT-OF-BOOKS (OR UNDISCLOSED) SALES, IS TO BE CONSI DERED AFTER ADJUSTMENT (ADD- I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 23 BACK) OF ROYALTY COST INCURRED, WHERE THE GROSS PRO FIT RATE IS RECKONED UPON DEDUCTING THAT COST, AS IS THE CASE (PB-2, PGS. 135 -138). TWO, THERE IS NO STATED BASIS, AND NEITHER COULD SH. BARDIA INFORM U S OF ANY, FOR THE ADOPTED SALE RATE OF . 2800 PMT. THE GOODS HAVING BEEN REGARDED AS SOLD DURING THE YEAR, AND PRIOR TO 31/10/2014, IT IS THE AVERAGE SA LE RATE FOR THIS PERIOD (I.E., APRIL TO OCTOBER, 2014), AND AS REFLECTED IN ACCOUN TS, THAT SHALL HAVE TO BE TAKEN FOR THE PURPOSE. WE ARE ACUTELY AWARE OF THE VAST DIFFERENCE IN THE SALE RATES OF LUMPS AND FINES. HOWEVER, THERE IS NO CLAS SIFICATION OF THE PHYSICAL STOCK FOUND INTO LUMPS AND FINES. IT IS THUS NOT PO SSIBLE TO STATE PRECISELY THE EXCESS BOOK-STOCK, PRODUCT-WISE. THE PRESUMPTION WO ULD THEREFORE BE OF THE SAME OBTAINING IN THE SAME RATIO AS APPEARING IN AC COUNTS, I.E., AS ON 31/10/2014, BEING AT 16,764.16 MT (LUMPS) AND 28,55 8.495 MT (FINES) (REFER TABLE 3 AT PARA 4.3), I.E., IN THE RATIO OF 1: 1.70 4. THE AVERAGE SALE RATE DURING THE YEAR (UP TO OCTOBER, 2014), FOR EITHER CATEGORY , WOULD ACCORDINGLY BE APPLIED TO THE EXCESS BOOK-STOCK OF BOTH LUMPS AND FINES, AS ARRIVED AT ON THE BASIS OF THEIR RESPECTIVE PRODUCTIONS AND THE BOOK SALES THEREOF DURING THIS PERIOD. FURTHER, ANOTHER OBSERVATION WOULD BE IN OR DER. SURE, EACH YEAR EACH YEAR IS A SEPARATE AND INDEPENDENT UNIT OF ASS ESSMENT AND, FURTHER, SANCTITY IS TO BE ACCORDED TO THE CLOSED ACCOUNTS. SO, HOWEVER, IN THE ASSESSEES CASE, AS STATED BOTH THE ASSESSMENT ORDE R (PARA 7.1.9) AND THE IMPUGNED ORDER (PARA 6.2.11), A SEARCH THE CASE OF SOME OF SAMDARIYA GROUP (IN MAY, 2013), HAS LED TO THE DISCOVERY AND SEIZUR E OF MATERIAL INDICATING UNDISCLOSED CASH SALES BY THE ASSESSEE, SINCE ADMIT TED, AND TOWARD WHICH IT HAS SINCE OFFERED INCOME. THAT IS, THERE IS MATERIA L ON RECORD TOWARD UNDISCLOSED CASH SALES IN THE EARLIER YEARS. IT IS ACCORDINGLY OPEN FOR THE ASSESSEE TO CONTEND THAT THE SAID SALES BE OFF-SET AGAINST THE OUT-OF-BOOK SALES IMPUTED QUA THE EXCESS BOOK-STOCK, AND THAT NO FURTHER ADDITIO N QUA THE SAID SALES BE MADE FOR THE CURRENT YEAR. THE ONLY DIFFER ENCE WOULD BE THAT THE SALE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 24 RATE FOR THE SAID SALE AS WELL AS THE GROSS PROFIT (ALBEIT ADJUSTED FOR ROYALTY) THEREON WOULD, IN THAT CASE, BE WITH REFERENCE TO T HAT OBTAINING FOR THE RELEVANT YEAR/S. THIS COMPLETELY ANSWERS Q.(C) AT PARA 4.1 ABOVE. 4.5 WE MAY NEXT PROCEED TO ADJUDICATE THE TWO ISSUE S DELINEATED AT (A) & (B) AT PARA 4.1 SUPRA. THE SAME IN THE MAIN CONCERN S DETERMINING THE EXTENT OF THE DIFFERENCES BETWEEN THE PHYSICAL AND BOOK-STOCK OF FINISHED (SALEABLE) AND SUBGRADE STOCK, AND THE PURPORT THEREOF. TOWARD THI S, WE NEED TO, AT FIRST, CONSIDER THE RELATIVE MERITS OF THE RESPECTIVE CASE S. THE PRIMARY DIFFERENCE BETWEEN THE REVENUES AND THE ASSESSEES APPROACH T O THE ADMITTED DIFFERENCES FOUND ON PHYSICAL VERIFICATION PURSUANT TO THE SEARCH IN OCTOBER, 2014, IS THAT WHILE THE REVENUE REGARDS THE STOCK O F FINISHED AND SUB-GRADE MATERIAL SEPARATELY, I.E., AS PER THE IBM REPORT, W HICH IS NOT DISPUTED, THE ASSESSEE CLAIMS THAT THE SAME BE CONSIDERED TOGETHE R, TAKING INTO ACCOUNT THE IRON ORE COMPONENT OF THE SUB-GRADE MATERIAL (REFER LETTER DATED 15/12/2016/PB-2, PGS. 1-21). IN FACT PER ITS REPLY DATED 09/12/2016 (WITH REFERENCE TO WHICH LETTER THE AO SOUGHT THE REPORT FROM IBM VIDE HIS LETTER DATED 10/12/2016/PB-1, PGS.98-99), THE ASSESSEE CON TENDS FOR INCLUSION OF THE STOCK OF ROM (I.E., 44,800 MT) AS WELL (AFTER EXCLU DING WASTE AT THE RATE OF 5%). THE REASON FOR THIS APPROACH IS STATED TO BE I N VIEW OF THE MINING PLAN (FOR: 201314 TO 201718)(MP-2), AS APPROVED, ASSES SING THAT TO BE THE RATIO OF THE IRON ORE IN THE EXCAVATED MATERIAL, THE BALA NCE 15% BEING LATERITE AND MANGANESE ORES, AT 10% AND 5% RESPECTIVELY; THE WAS TE MATERIAL BEING NIL. THE IBM, VIDE ITS REPORT DATED 04/12/2014, CLARIFI ES THE IRON RECOVERY IN THE SUBGRADE DUMP (43,271.43 MT) TO BE AT 85%, I.E., 36 ,780.71 MT. IT IS PERHAPS THIS THAT LED THE ASSESSEE TO CONSIDER 85% AS THE I RON ORE COMPONENT IN THE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 25 SUB-GRADE MATERIAL, AND DRAW COMPARISON ON THAT BAS IS. WE MAY HERE ALSO REFER TO THE AVERAGE GRADE IN THE VARIOUS DUMPS AS REPORTED BY MECL: TABLE 5 NAME OF THE AREA: KEOLARI MINES M/S. SHOBHA MINERAL, DIST. JABALPUR SR. NO. LOCATION OF DUMP VOLUME BULK DENSITY TONNAGE AVERAGE GRADE (FE %) REMARKS 1. MECL 1 313.40 3 940.200 52.92 DUMP NO. A 2. MECL 3 1,757.30 3 5,271.900 51.52 DUMP NO. C 3. MECL 2,4,7,12 & 15 19,695.00 3 59,083.500 50.12 DUMP NO. B 4. MECL 8,9A,10,1&11 16,322.00 3 48,966.300 51.73 DUMP NO. D 5. MECL 14 557.10 3 1,671.300 54.32 DUMP NO. F 6. MECL 13 6,487.40 3 19,462.200 50.4 DUMP NO. E1 7. MECL 13 141.80 3 425.400 50.4 DUMP NO. E2 8. MECL 13 3.60 3 10.800 50.4 DUMP NO. E3 TOTAL 45227 135681.6 CU MTR TE/CU MTR THE GRADE, IT MAY BE CLARIFIED, ONLY REFERS TO THE CONTENT PERCENTAGE THEREIN, SO THAT A 55% GRADE IMPLIES AN IRON CONTENT TO THAT EX TENT, AND DOES NOT SIGNIFY ANY QUALITATIVE ATTRIBUTE. THIS IN FACT APPEARS INC OMPREHENSIBLE TO A LOGICAL MIND, AS THE ONLY DIFFERENCE BETWEEN A 50% (SAY) AN D 55% (SAY) GRADE WOULD IMPLY A 5% (55% - 50%) DIFFERENCE IN IRON CONTENT, SO THAT BOTH SHOULD BE SALEABLE WITH A PRICE DIFFERENTIAL CORRESPONDING TO THAT DIFFERENCE. RATHER, IN I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 26 THAT CASE THE PRICES WOULD BE QUOTED ON A HUNDRED P ERCENT GRADE (HYPOTHETICAL THOUGH) BASIS, AND THE PRICE FOR ANY PARTICULAR GRA DE TO BE DETERMINED ON CHEMICAL ANALYSIS, ARRIVED AT ACCORDINGLY. IN FACT THIS IS DONE IN MANY A TRADE, VIZ. CHEMICAL INDUSTRY; THE PRICES BEING QUOTED ON 100% BASIS. FURTHER, THE OBTAINING PRICING MODEL MAY NOT BE IN TOTAL AGREEME NT THEREWITH, BUT A VARIANT THEREOF, AS IT MAY WELL BE THAT A LOWER IRON (FE) R ATIO IMPLIES A HIGHER (TO THAT EXTENT) COMPONENT OF ANOTHER CHEMICAL/MINERAL, WHIC H IS ALSO VALUABLE, SO THAT THE PRICING MAY FACTOR THIS ASPECT AS WELL. NO SUCH MINERAL, ETC. HAS HOWEVER BEEN STATED. ON THE CONTRARY, AS EXPLAINED, IN VIEW OF THE RECOVERY ISSUES, THE PRICES ARE NOT LINEARLY RELATED TO THE PROPORTION O F THE PRINCIPAL MINERAL CONTENT. 4.6 WITH THIS BACKGROUND, WE PROCEED TO EXAMINE THE ASSESSEES CASE EXPLAINING THE EXCESS STOCK OF FINISHED GOODS (AS O N 31/10/2014) WITH IT, ONLY TO FIND IT AS WHOLLY INFIRM, A NON-STARTER, WHICH O NLY NEEDS TO BE STATED TO BE REJECTED. THE REASON IS SIMPLE. THE PREMISE OF THE REVENUES CASE IS THE VARIATION IN THE QUANTITY OF DIFFERENT STOCKS AS FO UND ON PHYSICAL VERIFICATION VIS-A-VIS THEIR REPORTED QUANTITY (AS PER THE ASSES SEES ACCOUNTS). WHILE THE FINISHED STOCK WAS FOUND TO BE IN EXCESS ON PHYSICA L STOCK-TAKING, THAT OF THE SUBGRADE MATERIAL FOUND LESS. THE TWO FINDINGS/RESU LTS, ONE POSITIVE AND ONE NEGATIVE, CORROBORATE EACH OTHER. IT IS THIS THAT L ED THE AO TO INFER THAT THE ASSESSEE WAS MASQUERADING ITS FINISHED GOODS STOCK AS SUB-GRADE MATERIAL, I.E., REPRESENTING THE FORMER, BEING SALEABLE, IN T HE GUISE OF THE LATTER, UN- SALEABLE MATERIAL. IT IS NOBODYS CASE THAT THE ASS ESSEE HAD EXCAVATED MORE MATERIAL (FROM EARTH) THAN THAT DISCLOSED. AND, THI S, DESPITE THE ADMITTED ILLEGAL EXTRACTION, STATED BY THE ASSESSEE TO BE TO THE TUNE OF 39,000 MT, WHICH LED TO THE SUSPENSION OF ITS LICENSE FOR A TIME DU RING THE CURRENT YEAR, AS THE SAID EXTRA EXCAVATION DOES NOT NECESSARILY IMPLY UN DISCLOSED PRODUCTION, BUT I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 27 ONLY OF IT BEING NOT IN TERMS OF THE MINING PLAN. S URE, THE POSITIVE AND NEGATIVE DIFFERENCES DO NOT MATCH, THE EXCESS PHYSI CAL STOCK (OF FINISHED GOODS) BEING 90,359 MT, AS AGAINST THE SHORT PHYSIC AL STOCK (OF SUB-GRADE MATERIAL) AT 1,49,129 MT (1,92,400 43,271), OR AT A DIFFERENCE OF 58,770 MT (I.E., 1,49,129 90,359). BUT, THEN, IT IS NOT REQ UIRED TO BE, NOR IT IS ANYBODYS CASE THAT THE SAME SHOULD MATCH. IT IS PATENT THAT THE WASTE AND SUB-GRADE MATERIAL HAD BEEN USED EXTENSIVELY TOWARD LAYING RO ADS AND RAMPS; BUILDING RETAINING WALL; REPAIRS; PIT-FILLING, ETC., AND TOW ARD WHICH NO ADJUSTMENT HAS BEEN MADE BY THE ASSESSEE IN ITS ACCOUNTS AT ANY T IME. THIS, RATHER, FORMS THE CORNERSTONE OF THE ASSESSEES CASE AND, IN FACT, RE PRESENTS AN ADMITTED POSITION (REFER PARA 7.1.6 OF THE ASSESSMENT ORDER), AND WHI CH RESULTED IN THE IBM ABANDONING THE ASSESSMENT OF THE TOTAL EXCAVATION B Y THE ASSESSEE, EVEN AS ARGUED BY SH. BARDIA, THE ASSESSEES COUNSEL, HIMSE LF (REFER PARA 3.1). OF WHAT VALUE, THEN, THE CERTIFICATE (DATED 06/12/2016) FRO M THE GEOLOGIST (PB-2, PG. 139), JUSTIFYING USER OF SUBGRADE MATERIAL FOR SUCH PURPOSES AT 1,14,250 MT ? THE DRAFT MINING PLAN (2013-14 TO 2017-18), WHICH S TANDS SUBSEQUENTLY APPROVED BY IBM, SUBMITTED IN FEBRUARY, 2013, REPOR TS THE SUB-GRADE DUMP QUANTITY AT 1,66,600 MT. THE QUANTITY AS PER BOOKS AS ON 31/01/2013, I.E., IMMEDIATELY BEFORE THE SUBMISSION OF THE DRAFT MINI NG PLAN IN FEBRUARY, 2013, IS 2,05,000 MT, EXHIBITING THUS A DIFFERENCE OF 38,400 MT, I.E., BEFORE THE BEGINNING OF THE CURRENT PLAN PERIOD. THERE IS ACCORDINGLY NO REASON TO, AS THE ASSESSEE DOES, CLUB THE TWO TYPES OF MATERIALS, OR THE IRON ORE COMPONENT THEREIN, IN SEEKING TO JUSTIFY THE DIFFERENCE/S AS FOUND . IN DOING SO, IT IN FACT REMOVES THE VERY BASIS OF THE REVENUES CASE. THAT IS, TO BEGIN WITH, THE RE IS A COMPLETE MIS-APPRECIATION OF THE REVENUES CASE. TWO, IT VIOLATES THE BASIC PRINCIPLE OF COMPARISON, I.E., LIKE WITH LIKE. THEY IRON GRADE HAS NOT BEEN CONSIDERED BY THE REVE NUE EITHER IN THE FINISHED OR PROCESSED STOCK, WHICH RATHER IS TO THE ASSESSEE S ADVANTAGE IN VIEW OF THE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 28 WIDE VARIABILITY IN THE PRICES OF THE FINISHED GOOD S, AS A PERUSAL OF TABLE 4 SHALL SHOW. WHAT ALL HAS BEEN DONE IS TO COMPARE TH E QUANTITY, PHYSICALLY FOUND, IN THE PROCESSED IRON ORE AND SUB-GRADE DUMP S, WITH THAT REPORTED IN ITS RESPECT. THE ASSESSEE HAS NEITHER DOUBTED NOR CONTE STED THE FINDINGS OF THE PHYSICAL VERIFICATION; RATHER, IT ITSELF STATES THA T THE IRON ORE WITH IRON (FE) GRADE BELOW 50% ONLY IS SUB-GRADE, WHILE NONE OF TH E VARIOUS DUMPS (8) HAS AN IRON GRADE BELOW 50% (TABLES 1A, 5). RATHER, EVE N IF, FOR ARGUMENTS SAKE, THE IRON GRADE OF ANY OF ANY OF THESE DUMPS WAS BEL OW 50%, NOTHING PREVENTS THE ASSESSEE TO MIX THE SAME WITH HIGHER-GRADE MATE RIAL WHICH EVEN OTHERWISE FLOWS IN CONSTANTLY, TO UPGRADE TO A MIX OF 50% AND ABOVE, I.E., TO MAKE IT SALEABLE MATERIAL. THE PRICE THEREOF, STATE D TO BE SENSITIVE TO THE FE RATIO, IS ANOTHER, THOUGH AS WE SHALL PRESENTLY SEE , RELATED ASPECT OF THE MATTER. IN FACT, PER ITS GROUND 5, THE ASSESSEE STATES OF T HE PRICE OF . 2800 PMT BEING APPLICABLE TO THE IRON GRADE 57%-60%, WHICH CONTRAD ICTS ITS CLAIM OF THE IRON GRADE, IN VIEW OF THE LIMITATION OF THE PHYSICAL PR OCESSES BEING CARRIED OUT BY IT, DOES NOT EXCEED 55%, FOR WHICH GRADE CLASS, I.E ., BELOW 55%, ROYALTY IS ACCORDINGLY PAID BY IT ON ITS ENTIRE SALES. FURTHER, ITS CASE IS COMPLETELY INCONSISTENT WITH THE MINING PROCESS, AS EXPLAINED AND BORNE OUT FROM THE RECORD. THE 85% IR ON ORE IS IN THE RAW STOCK, FRESHLY EXCAVATED MATERIAL, AND NOT IN THE SUB-GRAD E MATERIAL, WHICH IS THE OUTCOME OF PROCESSING , STATED TO BE AT 80% (70%) (OF THE PROCESSED ORE), WITH THE BALANCE 20% (30%) BEING THE FINISHED STOCK (REF ER PARA 4.3), DIVIDED, AS EXPLAINED, EQUALLY BETWEEN LUMPS AND FINES. REF ERENCE, HERE, MAY ALSO BE DRAWN TO PARA 4 OF THE IBM REPORT DATED 12/1/2017 ( PB-1, PGS. 96-97), WHEREIN IT CLARIFIES THAT THE SUB-GRADE MATERIAL IS GENERATED FROM ROM. THE REFERENCE TO THE IRON RECOVERY IN THE SUB-GRADE MAT ERIAL, STATED TO BE AT 85% BY IBM (REFER TABLE 1B), IS INCOMPREHENSIBLE. WHY, THE IRON CONTENT IN THE FINISHED GOODS (TABLE 1A) IS ITSELF AT A MAXIMUM OF 54.32% (TABLE 5), WITH THE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 29 ASSESSEE PAYING ROYALTY ON ALL ITS SALES IN THE GRA DE CLASS BELOW 55% . THE IBM HAS, WHILE STATING OF THE IRON RECOVERY AT 85%, CLEARLY REFERRED TO THE MINING PLAN 2 (PG. 58), AND WHICH IS THE IRON ORE R ATIO IN THE RAW STOCK (ROM) AND NOT OF THE IRON CONTENT, MUCH LESS IN THE SUB -GRADE, THE BALANCE 15% (OF ROM) BEING LATERITE AND MANGANESE ORES. WHY, THE AS SESSEE ITSELF ADMITS OF A SUBSTANTIAL PART OF THE SUB-GRADE BEING UNUSABLE WA ST (REFER PARA 9 OF ITS LETTER DATED 15/12/2016 /PB-2 (PGS. 1-21), AND PARA 26 OF ITS LETTER DATED 23/11/2017, REPRODUCED IN THE IMPUGNED ORDER, APPEA RING AT PG. 37 THEREOF). COUPLE THIS WITH THE INFORMATION AS TO A LARGE PART (80%) OF THE PROCESSED IRON ORE BEARING LOW-GRADE IRON. WHERE, THEN, ONE MAY ASK, IS THE SCOPE OF IRON RECOVERY AT 85% THEREFROM ? PG. 36 OF MP-2 IS THE CHEMICAL ANALYSIS OF ROM STOCK OF IRON ORE, STATED TO BE AT 85% OF THE TOTAL MINERAL. THE AVERAGE IRON (FE) CONTENT STATED IS 55.36% THE BALANCE BEING O THER COMPOUNDS, VIZ. FE 2 O 3 ; SIO 2 ; AL 2 O 3 , ETC., EVEN AS EXPLAINED BY NS DURING HEARING. THI S IS ALSO BORNE OUT BY THE SAMPLE ANALYSIS REPORTS IN MP-1 (F OR 2008-09 TO 2012-13). THE ASSESSE IN FACT ITSELF, VIDE ITS GD. 5, STATES OF IRON CONTENT IN THE SUBGRADE TO BE AT 50%, I.E., AS STATED DURING HEARING. THE S UB-GRADE MATERIAL IS BY DEFINITION LOW GRADE MATERIAL, WITH AN IRON (MANGAN ESE) GRADE AT 45% (10%) OR BELOW BEING LIABLE TO BE REGARDED AS WASTE (ALSO SEE 4.7). THE ASSESSEE WAS UNABLE TO EXPLAIN THIS ANOMALY DURING HEARING. THE IBM REPORT DATED 12/1/2017, TO WHICH THE ASSESSEE REFERS IN SUPPORT (PARA 3 THEREOF), STATES OF CONSIDERING ALL THE MATERIALS, INCLUDING OB/WASTE, FOR THE PURPOSE OF COMPUTING THE TOTAL EXCAVATION, AND NOT FOR ANY OTHER PURPOSE ., SO THAT RELIANCE THEREON IS MISCONCEIVED, EVEN OTHERWISE AP PARENT FROM THE FOREGOING. FURTHER STILL, THE ASSESSEE, AFTER DRAWING COMPARIS ON OF THE DIFFERENT CATEGORY-WISE QUANTITIES AS PHYSICALLY FOUND WHIC H ARE NOT DISPUTED, EITHER AS TO QUANTITY OR CATEGORY, ON THE COMMON DENOMINAT OR OF IRON ORE, MAKING A RUBBISH OF THE DIFFERENT CLASSIFICATIONS AND CATEGO RY-WISE COMPARISON, BESIDES I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 30 REPRESENTING, AS EXPLAINED BY US HEREINBEFORE, AN U NFEASIBILITY, THE EXCESS IRON ORE IS AGAIN NOTIONALLY RECONVERTED INTO AND REGARD ED AS SUB-GRADE MATERIAL, EXPLAINING THE NOW SHORT-FALL THEREOF (I.E., PHYSIC ALLY), TO BE WASTED OR DEPLOYED TOWARD DEVELOPMENT WORKS, THOUGH NOT ACCOU NTED IN BOOKS. DRAWING A PARALLEL WITH THE MORE COMMON MANUFACTURI NG PROCESS, IT AMOUNTS TO RECONCILING THE DIFFERENCE IN THE STOCK OF FINIS HED GOODS, FOUND PHYSICALLY IN EXCESS, BY APPLYING THE YIELD OF FINISHED GOODS TO THE RAW MATERIAL STOCK, FOUND SHORT. THE FINISHED GOODS, TO THE EXTENT NOW IN EXCESS, I.E., ON BEING SO RECKONED, IN BOOKS, IS NOTIONALLY RECONVERTED INTO RAW MATERIAL, STATING IT TO BE WASTED. COULD, ONE WONDERS, THERE BE ANYTHING MORE BIZARRE AND DE HORS LOGIC AND FACTS THAN THIS ! IT IS ALL THIS THAT LED US TO STATE OF THE ASSESSEE S APPROACH IN THE MATTER, SINCE ACCEPTED, I.E., IN PRINCIPLE, BY THE LD. CIT( A), TO BE COMPLETELY MIS- FOUNDED. THE COMPLETE DISHARMONY BETWEEN THE FIGURE S MAKES A TRAVESTY OF THE ASSESSEES METHODOLOGY IN EXPLAINING THE DIFFER ENCE. WHILE THE TOTAL DIFFERENCE PER THE SAME, AND WHICH IT THEREFORE SEE KS TO EXPLAIN, IS 36,400 MT, IT JUSTIFIES A DIFFERENCE FOR A MUCH HIGHER FIGURE OF 1,14,250 MT THROUGH THE CERTIFICATE OF THE CONSULTING GEOLOGIST. THAT IS, T HE SAME HAS NO RELATION TO THE OBTAINING DIFFERENCE BETWEEN THE PHYSICAL AND BOOK FIGURES PER ITS OWN CALCULATION, WHICH IT SEEKS TO JUSTIFY. THE SAID CE RTIFICATE IS, IN FACT, AGAIN A MISREPRESENTATION BY THE ASSESSEE, AND HAS RIGHTLY BEEN NOT ACCEPTED BY ANY AUTHORITY. IF THE QUANTITY RECYCLED, I.E., TOWARD R OAD/RAMPS, RETAINING WALL, BACK-FILLING, ETC. COULD BE REASONABLY WORKED OUT, THE SAME WOULD HAVE BEEN BY THE TECHNICAL AGENCIES COMMISSIONED BY THE REVEN UE, THE IBM AND MECL, COMPUTING THE TOTAL EXCAVATION BY THE ASSESSEE SINC E INCEPTION, AS PER THE MANDATE GIVEN THERETO BY THE REVENUE, AND WHICH COU LD THEN BE COMPARED WITH THE REPORTED EXCAVATION. THERE IS NO WHISPER, MUCH LESS AUTHENTICATED DATA, ON THE SURFACE AREA OF THE ROADS/RAMPS LAID D OWN OVER THE YEARS, WHICH I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 31 HAS TO BE DONE, BY OWN ADMISSION, TIME AND AGAIN, F OR PROVIDING ACCESS TO THE PITS/MINE HEADS. SIMILARLY QUA THE OTHER JOBS CARRIED OUT, VIZ. THE DIMENSIONS OF THE BENCHES, RETAINING WALL, ETC., EXPLAINED TO BE BUILT FOR SECURITY REASONS, OR THE PIT SIZES FILLED-UP. WASHING OFF OF ROADS; L OSS OF MATERIAL, ETC. ON ACCOUNT OF RAINS, ALSO EMPHASIZED BY SH. BARDIA, IS ANOTHER FACTOR FOR WHICH NO REASONABLE ESTIMATE IS POSSIBLE. WHY, AS AFORE-N OTED, A CONSIDERABLE PORTION OF THE MINING AREA WAS, AS THE PHOTOGRAPHS SEEK TO SHOW, GETS SUBMERGED IN WATER DURING AND AFTER THE RAINY SEASO N, AS INDEED IS STATED TO BE THE POSITION. IN FACT A SIGNIFICANT PROPORTION OF T HE MATERIAL, BEING ACCUMULATED SINCE INCEPTION, WOULD PERTAIN TO THE P ERIOD RELATING TO MINING PLAN 1, DURING WHICH FIVE YEAR PERIOD (2008-09 TO 2 012-13) IRON ORE RATIO WAS MUCH LOWER, I.E., AT 40%. FURTHER STILL, ANY MINING FIRM WOULD FIRST USE THE OVERBURDEN (TOP SOIL), AND THEN THE WASTE, ESTIMATE D AT 20% OF THE TOTAL EXCAVATION OF 1.636 LAKH MT TOWARD THE SAME, WHICH STANDS ESTIMATED AT 20% OF THE TOTAL EXCAVATION (2.58 LAKH MT), AND ONLY TH EREAFTER THE SUBGRADE MATERIAL. (REFER MP-2/PG. 15, PARA 4.6). THIS, I.E. , THE NON-CONSIDERATION OF OB/WASTE TOWARD THE DEVELOPMENT WORKS BY THE ASSESS EE, PERHAPS ALSO EXPLAINS, EVEN IF TO AN EXTENT, THE OBSERVED DIFFER ENCE BETWEEN THE QUANTITY OF SUB-GRADE MATERIAL REQUIRED TO THE EXPLAINED AND TH E QUANTITY AS PER THE CERTIFICATE BY THE CONSULTING GEOLOGIST, ASCRIBED B Y THE ASSESSEE WHOLLY TO SUB- GRADE MATERIAL. COMING TO THE DIFFERENCE WORKED PER THE ASSESSEES EARLIER LETTER (DATED 09/12/2016), AS APPARENT FROM THE AOS LETTER DATED 10/12/2016 TO IBM, THE SAME IS AT 1,13,582.6 MT, AND WHICH PERHAPS ALSO EX PLAINS THE SAID CERTIFICATE, FOUND AS WITHOUT ANY DEFINITE BASIS. IN THIS LETTER THE ASSESSEE, IN SEEKING TO EXPLAIN THE DIFFERENCE IN FINISHED (PROCESSED) IRON ORE, ALSO INCLUDES RAW STOCK (ROM), AS WELL AS LATERITE AND MANGANESE ORES, AS W ELL AS THEIR COMPONENT IN THE SUB-GRADE MATERIAL, MAKING THE REFERENCE BY US TO THE EXAMPLE OF RAW I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 32 MATERIAL ( QUA A MANUFACTURING PROCESS) EQUALLY APPLICABLE. ROM I S RAW STOCK, NOT PHYSICALLY TAKEN, NOR COMPARED, AND AT A CONSTANT IN THE ASSESSEES RETURNS FOR THE PAST SEVERAL MONTHS (ALSO REFER PAR A 4.3). THERE IS NO QUESTION OF THE IRON CONTENT THEREIN, STATED TO BE IN THE RA NGE OF 48%-50%, BEING TAKEN INTO ACCOUNT IN COMPARING THE INVENTORY OF FINISHED GOODS. IT IS PERHAPS ON REALIZING ITS FOLLY IN DOING SO, THAT THE ASSESSEE REVISES ITS CALCULATION TO 36,400 MT, I.E., LESS THAN 1/3 OF THE ORIGINAL. CLEARLY, THE LD. CIT(A) DID NOT APPLY HIS MIND TO T HE ASSESSEES EXPLANATION, EVEN AS, AS IT APPEARS, IT IS DUE TO H IS BEING NOT FULLY SATISFIED THEREWITH THAT HE ACCEPTS IT IN PART. 4.7 FINDING NO MERIT IN THE ASSESSEES CASE, WITH T HAT OF THE REVENUE, BEING BASED ON UNDISPUTED, NAY, ADMITTED FACTS, ON A FIRM BASIS, WE ARE NOW AT LEAST BROADLY SPEAKING, IN A POSITION TO CONCLUDE T HE MATTER IN LIGHT OF THE DISCUSSION AND ANALYSIS IN THE FORGOING PARAGRAPHS (PARAS 4.1 TO 4.6). SO, HOWEVER, THERE ARE CERTAIN ASPECTS OF THE MATTER TH AT NEEDS TO BE CONSIDERED. ALSO, THE DISAGREEMENT BETWEEN THE REPORTED PRODUCT ION FIGURES AND THAT WHICH OUGHT TO ARISE, I.E., GIVEN THE VARIOUS SUBMI SSIONS AND EXPLANATIONS (SUMMARIZED IN TABLES 3, 4A AND 4B), IS FAR FROM SE TTLED/EXPLAINED. WHY SHOULD, AS AFORE-NOTED (PARA 4.3), THERE BE A VAST PRICE DIFFERENCE BETWEEN LUMPS AND FINES BOTH CONTAINING, AS EXPLAINED, SA ME IRON GRADE (50%-55%), ON ONE HAND, AS WELL AS, ON THE OTHER, INTERNALLY, I.E., BETWEEN DIFFERENT LOTS OF THE SAME PRODUCT TYPE; THE OBTAINING PRICE DIFFEREN TIAL IN THE LUMP AND FINE CATEGORIES BEING AT OVER 50% AND 400% RESPECTIVELY (TABLE 4B). ANSWER/S TO THESE QUESTIONS, OR ADDRESSING THE SAME WHICH MUS T BE WITH REFERENCE TO AN AUTHENTIC SOURCE OR THE CONDUCT OF ITS BUSINESS BY THE ASSESSEE, OR BOTH, IS EXTREMELY RELEVANT, AND AN ORDER DEHORS THE SAME, WOULD BE INCHOATE. I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 33 ONE COULD REGARD THE PRICE VARIATION BETWEEN THE TW O PRODUCT CATEGORIES, I.E., LUMPS AND FINES, AS ON ACCOUNT OF MINERAL REC OVERY DUE TO THE PRODUCTS PHYSICAL PROPERTIES, PRIMARILY, THE PARTICLE SIZE. WHILE THE LUMPS COULD BE EASILY CRUSHED INTO FINES, MAKING THE TWO EQUIVALEN T, IT MAY BE DIFFICULT TO, OR AT LEAST INVOLVE COST AND TECHNOLOGY, TO COALESCE F INES INTO LUMPS, RESULTING IN A LOWER PRICE FOR THE LATTER. IN FACT, AS EXPLAINED DURING HEARING, THE TRANSPORTATION COST ITSELF, WHERE THE TECHNOLOGY IS NOT AVAILABLE LOCALLY, EXCEEDS THE SELLING PRICE. THE VAST PRICE DIFFERENT IAL SO THAT THE SAME CANNOT BE ASCRIBED TO FLUCTUATION IN THE MARKET PRICE, IS CLEARLY INDICATIVE OF THE DIFFERENT QUALITIES OF THE FINISHED GOODS; THE LD. COUNSEL, SH. BARDIA, ALSO EXPLAINING THE PRICE TO BE VERY SENSITIVE TO THE IR ON GRADE, I.E., THE IRON (FE) RATIO (PARA 3.1). EVEN AS THIS MAY APPEAR TO BE AN INDEPENDENT OR A SEPARATE ISSUE, IT IS NOT SO, BUT INTEGRAL TO THE ISSUE AT HAND . A PRODUCT MAY BE SALEABLE AT RS. 3000 (SAY), WHILE THE OTHER LOT MAY NOT FETC H MORE THAN RS. 1000 (SAY) OR EVEN RS. 500 (SAY). SURELY, THE LATTER IS SUBGRA DE RELATIVE TO THE FORMER; THE PRICE DIFFERENTIAL ACROSS LUMPS AND FINES, INASMUCH AS THERE IS NO SEGREGATION BETWEEN THE TWO IN THE PHYSICAL STOCK-TAKING, BEING MORE THAN 750% ((3050/400) X 100) (TABLE 4B). AS AFORE-NOTED (PARA 4.4), THERE IS NO SEGREGATION OF PROCESSED IRON ORE STOCK INTO LUMPS AND FINES (SEE TABLE 1A). THIS CONCEPT (OF VARYING QUALITIES) GETS REFLECTED IN THE VERY IDEA OR NOTION OF THE THRESHOLD VALUE. THE IBM REGULARLY, AFTER CONSULTATION WITH DIFFERENT STAKEHOLDERS, DECLARES THE THRESHOLD VALUE FOR DIFF ERENT ORES IN THE COUNTRY. THE THRESHOLD VALUE (TV) OF A MINERAL IS DEFINED AS : THE THRESHOLD VALUE OF MINERALS MEANS LIMIT PRESCRIBED BY THE INDIAN B UREAU OF MINES FROM TIME TO TIME BASED ON THE BENEFICIABILIT Y AND/OR MARKETABILITY OF A MINERAL FOR A GIVEN REGION AND A GIVEN TIME, BELOW WHICH A MINERAL OBTAINED FROM MINING CAN BE DISCARDED AS WASTE . ( SOURCE: INDIA GAZETTE NOTIFICATION DATED 16/10/2009 /EMPHASIS, IN ITALICS, OURS ) I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 34 AS PER THE SAID NOTIFICATION (COPY ON RECORD), THE THRESHOLD VALUE OF IRON ORE (HEMATITE) IS 45%. ACCORDINGLY, AN IRON RATIO BELOW 45% IS TO BE REGARDED AS WASTE, THOUGH AS PER THE MINING RULES THE SAME IS N OT TO BE REMOVED (FROM THE MINING SITE), BUT STACKED SEPARATELY THEREAT ON THE PREMISE THAT TODAYS WASTE IS TOMORROWS WEALTH. A FUTURE TECHNOLOGY MAY ENABL E COMMERCIALLY VIABLE EXTRACTION OF IRON FROM THE IRON CONTENT BELOW THAT RATIO. THE WASTE THOUGH COULD BE AND, RATHER, IS TO BE USED FOR VARIOUS COL LATERAL PURPOSES, VIZ. LAYING ROADS AND RAMPS, REPAIRS, BUILDING RETAINING WALL, PREPARING BENCHES, FILLING-UP PITS AND DUMPS, ETC. AND IT IS THIS, I.E., THE VARYING QUALITIES OF FIN ISHED GOODS, THAT LED US TO TALK (AT PARA 4.6) ABOUT THE MIXING OF THE DIFFEREN T BATCHES BEARING DIFFERENT GRADES OF IRON, BOTH WITH A VIEW TO UPGRADE IT, MAK ING IT EITHER SALEABLE OR OTHERWISE ENHANCING ITS MARKETABILITY AND/OR PRICE QUOTIENT. THAT IS, THERE IS A DISTINCT POSSIBILITY OF THE SAID MATERIAL, EVEN IF NOT SALEABLE, AS WHERE THE IRON GRADE IS BELOW 50%, BEING RECYCLED, WHICH MAY ALSO BE RESORTED TO UPGRADE THE SAME. AS SUCH, THE NARRATION ALONG SIDE THE LOW -GRADE MATERIAL IN TABLE 4A (AT PG. 17) MUST READ AS: (RECYCLED/SOLD AS SUB-GRADE TO BENEFICIATION PLANTS ) . CONTINUING FURTHER, IT CANNOT BUT BE OTHERWISE. THE SUBGRADE MATERIAL IS PRACTICALLY VALUELESS, I.E., VIS-A-VIS THE FINISHED GOOD, WHICH ITSELF GETS SOLD, DEPENDING UPON ITS IRON GRADE, WITH A WIDE PRICE VA RIABILITY, BEING AS LOW AS RS. 400 PMT (TABLE 4B), SO THAT ANY BUSINESSMAN WOU LD NOT DUMP MATERIAL UNLESS THERE IS NO SCOPE FOR UP-GRADATION. IT IS TH IS, AS WELL AS THE LACK OF A CONSISTENT, CLEAR RESPONSE, ENUNCIATING ITS CASE, BY THE ASSESSEE, THAT HAS LED TO A CONFUSION AS TO WHAT DISTINGUISHES A FINISHED-GOO D FROM A SUBGRADE, WHICH IS THE CORE ISSUE THE CORRECT CATEGORIZATION REFE RRED TO PARA 4.2. THERE ARE CLEAR POINTERS TOWARD THIS. WHILE THE ASSESSEE CONS ISTENTLY MAINTAINS OF IRON ORE BEING SALEABLE IN THE IRON GRADE CLASS 50%-55%, WITH THAT BELOW 50% BEING SUB-GRADE, PER GD. 5 OF ITS APPEAL IT CLAIMS TO BE SELLING IRON ORE IN THE I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 35 GRADE CLASS 57%-60%, BELYING ITS STAND OF THE LIMI TATION OF THE PHYSICAL PROCESSES BEING CARRIED OUT BY IT TO IMPROVE THE IR ON GRADE BEYOND 55%. IT THUS TACITLY ADMITS TO PROJECTING INCORRECT FACTS, AS WELL AS EVADING ROYALTY, PAID ON ITS ENTIRE SALES IN THE GRADE CATEGORY BE LOW 55%. MENTION HERE BE ALSO MADE TO THE STATEMENT OF NS, REPRODUCED AT PAG E 26 OF THE IMPUGNED ORDER, STATING IRON ORE BEING SALEABLE IN THE GRADE CATEGORY 54%-55%. IF THAT IS INDEED SO, WHICH FACT COULD BE EASILY PROVED, OR CA LLED UPON TO, THE ENTIRE MATERIAL BELOW 54% WOULD STAND TO BE CLASSIFIED AS SUBGRADE. THERE IS HOWEVER NO SUCH ANSWER/S, AND FOR WHICH WE HAVE PER USED THE ENTIRE STATEMENT OF NS (PB-2, PGS 211 319), WHICH IN FAC T IS IN HINDI LANGUAGE. THE RELEVANT QUESTIONS & ANSWERS, ARE AS UNDER: IZU 5- M/S. KKSHKK FEUJY DSOYKJH DH MINES DK EQ[; :IK LS MUDH CHEMICAL COMPOSITON DS CKJS ESA CRK;SA ? MRRJ & FE COMPOSITION, LATERITE ESA FE 2 O 3 - 47 % TO 48 % IRON ORE - 50 % TO 51 % MAGNESE - 15 % TO 20 % (AFTER PROCESS) IZU 6- M/S. KKSHKK FEUJY& /KEDH DH MINES DK EQ[; :IK LS MUDH CHEMICAL COMPOSITON DS CKJS ESA CRK;SA ? MRRJ & LATERITE - 46 % TO 48 % IRON ORE - 47 % TO 48 % MAGNESE - 18 % TO 20 % (AFTER PROCESS) IZU 7- M/S. KKSHKK FEUJY] DSOYKJH }KJK FUDYUS CKYH IRON ORE DH DOKYHVH DS CKJS ESA FOLRKJ IWOZD CRK;SA DH ;G FDL GRADE DK GKSRK GS ? MRRJ & M/S. KKSHKK FEUJY] DSOYKJH }KJK [KUHT MR[KUU DJUS DS MI JKAR DZSKJ LS O SCREANING EKHU LS O YSOJ }KJK SORTING DJUS DS MIJKAR TKS [KUHT DK % IRON ORE DK IK;K TKRK GS A OG 48 % LS 50 % DS YXHKX DK GS A IZU 28- ORZEKU ESA IBM }KJK FDRUS GRADE RD DS IRON ORE DKS FCDZ; DJUS ;KSX; EKUK TKRK GS] FTLIJ ROYALTY NS; GKSRH GS ? I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 36 MRRJ & IBM }KJK GRADE WISE JSV DK IZDKKU GJ EKG FD;K TKRK GS A IJARQ LCLS DE GRADE DK IRON FD D;K ROYALTY GS EQ>S UGHA IRK A GEKJS }KJK ,D ,OJST GRADE 55 % DS UHPS DH ROYALTY DK HKQXRKU E/; IZNSK [KUHT FOHKKX DKS FN;K TKRK GS A NB: THE REFERENCE TO QS. 8 & 29 (IN THE IMPUGNED OR DER) IS INCORRECT, PERHAPS DUE TO TYPOGRAPHICAL ERRORS; THE SAME BEING 7 & 28 RESPECT IVELY. FROM ASSESSEES STAND POINT, HOWEVER, THIS MAY NOT BE OF MUCH SIGNIFICANCE. THERE IS NO HARD AND FAST CATEGORIZATION AS TO WHAT CONSTITUTES SUBGRADE, WHICH WOULD STAND TO FALL IN A RANGE BASED ON TECHNOLOGY, BESIDES THE MARKET DYNAMICS. THUS WHEN THE ASSESSEE SAYS OF IRON ORE B EING A FINISHED GOOD IN THE GRADE 50%-55%, IT DOES NOT IMPLY, AS THE REVENU E, AND WE MUST CONCEDE, FOR NO PARTICULAR FAULT OF ITS, CONSIDERS THE SAME AS BEING A SINGLE CLASS, SALEABLE AT THE SAME RATE. FURTHER, HOW COULD A MATERIAL LIABLE TO BE RECYCLED/REPROCESSED, WITH A VIEW TO BEING UPGRADED , LEAD TO ANY ADDITION FOR DIFFERENCE IN QUANTITY BASED ON SUCH CATEGORIZATION ? WHY, IF, AS STATED, THE ROM ITSELF CONTAINS IRON GRADE AT 50%- 51% (OR EVEN 48%-50%, AS STATED BY NS IN ANSWER TO OTHER QUESTIONS, VIZ. Q. 7 OF THE S TATEMENT DATED 07/1/2015), A GRADE CLASS OF 50% OR EVEN 51% IS HARDLY SALEABLE . THE CLAIM, PER GD. 5 OF RS. 2800 (OR RS. 3050) AS REPRESENTING THE RATE OF IRON GRADE 57%-60%, HAS TO BE UNDERSTOOD IN THIS CONTEXT, I.E., AS APPLICABLE TO HIGHER GRADE CATEGORIES, EVEN AS UNDERSTATING GRADE CLASS TO SAVE ON ROYALTY , WHICH INCREASES WITH THE GRADE CLASS, CANNOT BE RULED OUT. NO DUMP FALLING I N THAT CATEGORY (57%-60%) WAS HOWEVER FOUND (TABLE 5), EVEN AS MECL TOOK AS M ANY AS 15 SAMPLES (FROM THE EIGHT DUMPS), I.E., MORE THAN ONE SAMPLE FOR LARGER DUMPS. IN ANY CASE, FROM THE TAX POINT OF VIEW, IT WOULD MATTER O NLY IF THERE IS AN UNDERSTATEMENT OF CONSIDERATION. THE PURCHASE ORDER S (POS) FROM ITS BUYERS, SPECIFYING THE IRON GRADE, INASMUCH AS PRICE WOULD ONLY BE WITH REFERENCE THERETO, OR THE CHEMICAL ANALYSIS REPORTS ACCOMPANY ING THE SALE CONSIGNMENTS, IN SUBSTANTIATION THEREOF, COULD ESTABLISH THE SAME . AGAIN, THE NON-CORRELATION I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 37 OF THE PRODUCTION OF FINISHED AND SUBGRADE DOES NOT , IN VIEW OF THE FOREGOING, CARRY ANY PARTICULAR SIGNIFICANCE. WE HAVE, IN ARRIVING AT THE AFORESAID FINDING/S, AL SO CONSIDERED AND GIVEN REGARD TO THE APPROVED MINING PLANS, I.E., MP -1AND MP-2. AS AFORE- NOTED (PARA 4.6), PAGE 36 OF MP-2 STATES OF THE AVE RAGE IRON GRADE OF ROM AT 55.36%. IN CHAPTER I THEREOF, UNDER SECTION DEVELO PMENT, THE FOLLOWING IS NOTED UNDER THE HEADING ACHIEVEMENT (PG. 14): ACHIEVMENT CONSIDERING THE LOW GRADE FE VALUE DEMAND FROM BENE FICIATION PLANT THE EARLIER CALLED LOW GRADE MATERIAL EARLIER WHICH HAS BEEN COUNTED I N STACKS NOW BECOME SALEABLE AND AS ON DATE OB GENERATION IS NEGLIGIBLE. THIS GETS FURTHER CLARIFIED PER CHAPTER-III TITLED RESERVES, UNDER THE SECTION ECONOMIC AXIS (AT PAGE 29), REPRODUCED AS UNDER: ECONOMIC AXIS ON THE BASIS OF FEASIBILITY STUDY ECONOMIC VIABILI TY OF THE DEPOSIT, I.E., LATERITE/IRON ORE/MN ORE HAS BEEN ESTABLISHED PRESE NTLY TO WORK OUT G1=3.0388 HA AND AS PER GEOLOGICAL SECTION. SUB-GRADE: NO SUB-GRADE LIKELY TO BE GENERATED . FURTHER THE LEASE AREA HAS ROM MINERAL STACKS WHICH BECOME SALEABLE DUE TO CHANGE IN THRESHOLD VALUES AND DEMAND FROM BENEFICIATION PLAN T. THE MINERALS IN STACKS ARE SALEABLE AFTER SCREENING TO THE END USERS. THE SUB- GRADE DUMPS ARE CONSIDERED AS STACK OF MINERALS AND NOT CONSIDERED UNDER RESERVE AND AR E CALLED AS IN SITUE WITH MINERAL RECOVERY FOR MN ORE, IRON ORE AND LATERITE AS MENTI ONED IN NEXT PARAS. MINERAL REJECT: NO MINERAL REJECTS LIKELY TO BE GEN ERATED . , AS WELL AS PER CHAPTER VI, TITLED HANDLING OF WA STE/SUBGRADE MATERIAL (AT PAGE 58). PARAS 6.2 & 6.3 THEREOF ARE RELEVANT, AND READ AS UNDER: 6.2 RATE OF YEAR-WISE GENERATION OF SUB GRADE MINE RAL WITH REFERENCE TO THRESHOLD VALUES AND PROPOSAL FOR STAC KING FOR NEXT FIVE YEARS I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 38 NO GENERATION OF SUB GRADE IS PROPOSED DURING PROPO SAL PERIOD . 6.3 QUANTITY AND GRADE OF SUB-GRADE MATERIAL AVAILA BLE AT THE MINE AS ON DATE DULY SUPORTED BY PLANS AND SECT ION AS NO SUB GRADE MATERIAL HENCE NOT APPLICABLE . (EMPHASIS, BY ITALICS, OURS) PAGE 35 OF MP-2 CONTAINS CATEGORY-WISE UPDATED RESE RVES WITH GRADE (INDICATED END USE GRADE WITH ANALYSIS) AS WELL AS MARGINAL GRADE. THE FE CONTENT THE IRON ORE IS STATED AT 52.22% TO 57.20%. THE AVERAGE GRADE FOR THE IRON ORE LUMPS AND IRON ORE FINES IS STATED BENEATH AT 52.9% AND 55.55% RESPECTIVELY. IT IS THUS CLEAR THAT THE MATERIAL FA LLING BETWEEN 45% TO 55% HAS BEEN, CONSIDERING THE DEMAND FROM THE INDUSTRY, BEI NG IRON & STEEL AND CEMENT INDUSTRIES IN THE MAIN, WHICH IS IN THE RANG E OF 55%, HAS BEEN REGARDED BY IBM (IN MP-2) AS SUBGRADE. AS THE AVERAGE FE CON TENT IN ROM IS, AS PER IT, AT 55% PLUS (PG. 36), THEREFORE NO SUB-GRADE IS STATED TO BE GENERATED DURING THE PLAN PERIOD, I.E., AT PAGES 14,29 & 58 (OF MP-2 ). THIS IS ALSO BORNE OUT BY THE AVERAGE GRADE, CONSIDERED AS FALLING BETWEEN 52 .22% TO 57.2%, ON THE BASIS OF THE SAMPLE ANALYSIS MADE, WHICH CAN THEREF ORE BE SOLD DIRECTLY TO THE INDUSTRY OR TO THE PELLETAIZATION PLANTS. ANY GRADE NOT DIRECTLY SALEABLE WOULD GET SOLD FOR UP-GRADATION TO THE BENEFICIATION PLAN TS, AS STATED IN CHAPTER I. IT IS THIS THAT LED THE IBM TO NOT REGARD ANY EXCAVATION DURING THE PLAN PERIOD (2013-14 TO 2017-18) AS SUBGRADE. THIS ALSO EXPLAIN S, AND IS IN FACT BROADLY IN AGREEMENT WITH THE ASSESSEES CLAIM, CONSIDERED SO, OF THE IRON ORE BEING NOT SALEABLE WHEN THE IRON GRADE FALLS BELOW 54%, SO TH AT 1,34,010.3 MT (OUT OF THE TOTAL FINISHED STOCK OF 1,35,681.6 MT) WOULD STAND TO BE REGARDED AS SUBGRADE. ON THE OTHER HAND, AS SEEN, THE ACTUAL GENERATION, STATED TO BE IN THE GRADE CLASS 48%-50%, IS BELOW 55%, AS CONSIDERE D IN MP-2. IT IS THIS THAT LED THE ASSESSEE TO REGARD IT, WHERE NOT DIRECTLY S ALEABLE TO PELLETAIZATION PLANTS, AS SUBGRADE. IN FACT, THERE IS REFERENCE TO , IN CHAPTER-VII (PAGE 59), OF I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 39 IRON GRADE 45%-55% BEING SOLD TO BENEFICIATION PLAN TS (10MM 100MM) AND FINES (> 10MM) BEING SOLD TO BROKERS (FE: 44%-48%); WASHERIES (FE:52%- 57%) AND PELLETAIZATION PLANTS (FE:58%-60%). THAT I S, THE SITUATION IS NEITHER STATIC NOR RIGID AND, BESIDES, A FUNCTION OF TECHNO LOGY AND MARKET DYNAMICS. 4.8 THE STATEMENT OF SH. GHANSHYAM PATEL, MINING MA NAGER, HAS ALSO BEEN CAREFULLY PERUSED (PB-2, PGS. 182-210). ITS RETRACT ION, MADE TWO YEARS LATER, IS WITHOUT SUBSTANCE; HE FULLY UNDERSTANDING THE QUEST IONS ASKED, ANSWERING THEM DEFINITELY. THE SAME IS, THUS, NOT A VALID RET RACTION. SO, HOWEVER, HIS STATEMENT STANDS MISCONSTRUED BY THE REVENUE. THE A DMISSION BY HIM OF NO WEIGHT BEING RECORDED ON THE TPS IS LIMITED TO THOS E FOR TRANSPORTING GOODS TO SSI, AN ASSOCIATE CONCERN, AND NOT IN GENERAL. SSI WAS DURING THE RELEVANT PERIOD, BEING IN FACT PRIOR TO THE COMMENCEMENT OF ITS OPERATIONS IN JANUARY, 2015, BEING TRANSPORTED, BESIDES CONSTRUCTION MATER IAL PURCHASED BY IT, SUB- GRADE MATERIAL, PRESUMABLY FOR, AS STATED, TRIAL PR ODUCTION. IF SO, THE SAME WOULD BE BORNE OUT OF ITS RECORDS. IT COULD ALSO B E THAT THE SAID MATERIAL, INCLUDING OB/WASTE, WAS, OR TO ANY EXTENT, FOR USER OF SUCH MATERIAL FOR THE SAME PURPOSES TO WHICH ASSESSEE PUTS IT, I.E., LAYI NG ROADS, RAMPS, FOR USING FOR CONSTRUCTION, ETC. HIS STATEMENT, THUS, APART FROM BEING APIECE WITH THE OTHER EVIDENCE AS TO THE ASSESSEES ACCOUNTS NOT REPRESEN TING TRUE AND FAIR STATE OF AFFAIRS, DOES NOT, TO OUR MIND, HAVE ANY DIRECT INC OME IMPLICATION. IN CONCLUSION 5.1 THE MATTER, THUS, ON A REVIEW THEREOF IN ITS EN TIRETY (REFER PARAS 4.1 TO 4.8), IN OUR CONSIDERED OPINION, COMES TO MUCH ADO ABOUT NOTHING. THE DIFFERENT QUANTITIES/FIGURE ARE NOT LIABLE TO BE RE CONCILED AND, ACCORDINGLY, NO CASE FOR ANY RECONCILIATION OF DIFFERENT FIGURES, O R FOR ANY ADDITION ON THE BASIS OF THE SAID CATEGORIZATIONS, IS ACCORDINGLY MADE OU T, EITHER TOWARD EXCESS I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 40 PHYSICAL OR BOOK STOCK. THE EXCESS STOCK IS, UNDE R THE CIRCUMSTANCES, ONLY BEING SO/NOTIONAL. THIS, THUS, ANSWERS Q.(A) & (B) AT PARA 4.1 SUPRA. THE ASSESSEE, DESPITE THAT ITS BOOKS OF ACCOUNT CANNOT BE REGARDED AS PROPERLY MAINTAINED, SUCCEEDS. THE ASSESSEE, THOUGH, IS ADVI SED TO MAINTAIN PROPER RECORDS; MUCH OF THE PRESENT MESS, AS WE ARE CONSTR AINED TO DESCRIBE THE PRESENT IMBROGLIO, ARISING FOR LACK OF THE SAME, I. E., APART FROM THE LACK OF PROPER PRESENTATION OF FACTS AND NON-APPRECIATION O F THE REVENUES CASE BY THE ASSESSEE. IT NEEDS TO BE APPRECIATED THAT ONLY PROP ER RECORDS COULD FORM THE BASIS OF A PROPER ASSESSMENT, AND WHICH MAY REQUIRE RESTATEMENT OF VARIOUS FIGURES. THIS IS ALSO PARAMOUNT AS WITHOUT SUCH A R ESTATEMENT, THE DIFFERENCE BETWEEN THE ACTUAL AND THE BOOK FIGURES WOULD CONTI NUE TO OBTAIN, IMPERILING THE ASSESSEE FOR ALL TIMES. ANY FUTURE SEARCH OR SU RVEY AT ITS BUSINESS PREMISES, ETC., WOULD LEAD TO A FRESH CHARGE OF UND ERSTATEMENT OF INCOME BEING IMPUTED ON THE BASIS OF THE OBTAINING DIFFERENCE/S, AND WHICH ALSO HAS PENALTY AND PROSECUTION IMPLICATIONS. IT MAY ALSO BE RELEVA NT HERE TO MENTION (AND WHICH WOULD AT THE SAME TIME ALSO ADDRESS THE REFER ENCE TO THE ASSESSEES PAST, WHEREAT SEARCHES ON IT (OR ANOTHER) YIELDED UNDISCL OSED WEALTH, WHICH WAS ADMITTED AND DULY RETURNED BY IT (FOR AYS. 2011-12 & 2012-13), PAYING TAX THEREON), THAT THERE IS A QUALITATIVE DIFFERENCE, E VEN OTHERWISE APPARENT, BETWEEN AN EXCESS PHYSICAL STOCK AND EXCESS BOOK-ST OCK, REPRESENTING OPPOSITE SITUATIONS, EVEN AS, AS EXPLAINED HEREINBE FORE, RESULTS IN AN INFERENCE OF ESCAPEMENT OF INCOME FROM TAX AND, ACCORDINGLY, LIABLE TO BE BROUGHT TO TAX, ALBEIT AT DIFFERENT AMOUNTS, REPRESENTING VALU ATION/S THEREOF. WHILE A POSITIVE DIFFERENCE (EXCESS PHYSICAL STOCK) WOULD T RANSLATE INTO AN ADDITION IRRESPECTIVE OF ANY ADDITION MADE ON THAT COUNT (OR FOR UNDISCLOSED ASSETS), IT MAY NOT NECESSARILY BE SO IN THE CASE OF A NEGATIVE DIFFERENCE (EXCESS BOOK- STOCK), WHICH INDICATES, AMONG OTHERS, UNACCOUNTED DISPOSAL OF THE RELEVANT STOCK (I.E., AS OF THE DATE OF THE PHYSICAL VERIFIC ATION), SO THAT INCOME I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 41 CONCOMITANT TO THAT DISPOSAL HAD ESCAPED ASSESSMENT (AS ON THAT DATE). IT IS, ACCORDINGLY, OPEN TO THE ASSESSEE TO MAKE OUT A CAS E THAT THE PAST UNACCOUNTED INCOME, SINCE ADMITTED AND RETURNED, AROSE ON ACCOU NT OF SUCH UNDISCLOSED DISPOSAL. THAT IS, THE SAID ESCAPED INCOME, BEING S OUGHT TO BE BROUGHT TO TAX FOR THE CURRENT YEAR, HAD ALREADY SUFFERED TAX IN A N EARLIER YEAR. AGAIN, A FURTHER CLARIFICATION MAY BE IN ORDER. THAT IS, IN A CASE AS THE PRESENT ONE, WHERE THE ESCAPEMENT OF INCOME IS ON ACCOUNT OF UNA CCOUNTED DISPOSAL, THE ASSESSEE REALIZES ITS VALUE (RS. 100, SAY), WHICH GETS DISCLOSED/RETURNED ON THE CORRESPONDING ASSET/MONEY BEING DISCOVERED (BY THE REVENUE). THE INCOME ON THIS SALE, HOWEVER, WOULD ONLY BE AFTER DEDUCTIN G ITS COST, INCURRED AND REFLECTED IN ACCOUNTS (RS. 40, SAY), I.E., RS. 60. THIS IS AS THE BALANCE RS. 40, THOUGH REALIZED THROUGH SALE, CONTINUES TO BE REFLE CTED IN ACCOUNTS, ALBEIT DOES NOT REPRESENT AN ACTUAL CAPITAL (OF THE REPORTING E NTITY). THIS NEEDS TO BE BORNE IN MIND, AND ONCE AGAIN EMPHASIZES THE NEED FOR BRI NGING THE ACCOUNTS TO ACTUALS. THE ORDERS OF THE REVENUE AUTHORITIES ARE ACCORDINGLY SET ASIDE, AND ADDITIONS DELETED. 5.2 THE CASE OF SHOBHA MINERALS (DHAMKI), AS WAS A COMMON CONTENTION OF THE PARTIES BEFORE US, IS ALSO THE SAME. NO SEPA RATE ARGUMENTS IN ITS RESPECT WERE MADE. RATHER, AS WE OBSERVE, WHILE THE AVERAGE BULK DENSITY OF FINISHED GOOD IS 3.5, THAT WITH A LOWER DENSITY (2.5) (AT 95 , 613.45 MT), QUALIFYING AS WASTE, HAS ALSO BEEN INCLUDED WHILE COMPUTING THE T OTAL FINISHED GOOD STOCK OF 1,22,744.75 MT, IN THE MECLS REPORT (PB-1, PG. 93) . NO SEPARATE ADJUDICATION FOR ITS APPEALS IS ACCORDINGLY CALLED FOR, AND OUR ADJUDICATION FOR SHOBHA MINERALS (KEVLARI), SHALL EQUALLY APPLY TO T HE APPEALS IN RELATION TO THIS ASSESSEE. 6. IN THE RESULT, APPEALS OF THE ASSESSEES ARE ALLO WED AND THE REVENUES APPEALS ARE DISMISSED. I.T.A. NOS.51,52,77& 78/JAB/2018 ASSESSMENT YEAR:2015-16 42 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 24, 2020 SD/- SD/- (BHAVNESH SAINI) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:24/02/2020 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANTS: (I) SHOBHA MINERALS (KEVLARI), 765, NEAR ANAND TALKIES, NAPIER TOWN, JABALPUR (II) SHOBHA MINERALS (DHAMKI), 765, NEAR ANAND TALKIES, NAPIER TOWN, JABALPUR 2. THE RESPONDENT: ASST. CIT (CENTRAL CIRCLE), JABALPUR, DY. CIT (CENTRAL), 2 ND FLOOR, 291, RAMNATH BUILDING, NAPIER TOWN, JABALPUR. 3. CONCERNED CIT 4. THE CIT(A) 5. CIT-D.R., I.T.A.T.
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Startup Fundraising
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360 Brand Audit (30 mins)
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Startup Dissolution Resolution
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Non-Compete Agreement
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