Deputy Commissioner of Income tax, Bangalore V. Mysore Minerals Ltd, Bangalore

ITA 721/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7613 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N PARBAT
• Assessee Lawyers: K CHAN DRASEKHAR
• Section: 143(3); 14A; 145; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH 'C' BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.721/BANG/2017 (ASST. YEAR 2012-13) THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-4(1)(2), BANGALORE. . APPELLANT VS. M/S MYSORE MINERALS LTD., BMTC, SHANTHINAGAR, TTMC BUILDING, A BLOCK, 5 TH FLOOR, SHANTHINAGAR, BANGALORE. . RESPONDENT PAN AACCM28731 APPELLANT BY : SHRI R.N PARBAT, CIT RESPONDENT BY : SHRI K CHAN DRASEKHAR, ADVOCATE DATE OF HEARING : 31-8-2017 DATE OF PRONOUNCEMENT : 8-9-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - 4, BANGALOR E DATED 29/12/2016 FOR ASST. YEAR 2012-13. ITA NO. 721/B/17 2 2. BRIEFLY STATED, THE RELEVANT FACTS OF THE CASE ARE AS UNDER:- 2.1 THE ASSESSEE COMPANY, A GOVERNMENT OF KARNATAK A UNDERTAKING ENGAGED IN THE EXTRACTION OF MINERALS A ND MINERAL ORES, FILED ITS RETURN FOR ASST. YEAR 2012-13 ON 29/9/201 2 DECLARING INCOME OF RS.124,19,75,120/-. THE CASE WAS TAKEN UP FOR S CRUTINY AND THE ASSESSMENT WAS COMPETED U/S 143(3) OF THE INCOME-T AX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 9/3/2015, WHEREI N THE ASSESSEES INCOME WAS DETERMINED AT RS.124,94,759/-, IN VIEW O F THE FOLLOWING ADDITIONS/DISALLOWANCES:- (I) SUPPRESSED SALES TO M/S KALYANI STEELS LTD., - RS.74,54,187/- (II) DISALLOWANCE U/S 14 R.W. RULE 8D - RS.15,452/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 9/3/ 2015 FOR ASST. YEAR 2012-13, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A)-4, BANGALORE. THE LD CIT(A) DISPOSED OFF THE APPEAL V IDE ORDER DATED 29/12/1016, ALLOWING THE ASSESSEE PARTIAL RELIEF; B Y UPHOLDING THE DISALLOWANCE U/S 14A R.W RULE 8D AND DELETING THE A DDITION MADE BY ITA NO. 721/B/17 3 THE ASSESSING OFFICER IN RESPECT OF SUPPRESSED SALE S TO M/S KALYANI STEELS LTD., 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-4, BANGALORE DATED 29/12/2016 FOR ASST. YEAR 2012-13, HAS FILED THIS APPEAL BEFORE THE TRIBUNAL WHEREIN IT HAS RAISED TH E FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD.CIT (A) IS OPPOSED TO THE L AW AND FACTS OF THE CASE. 2. THE LD.CIT (A) HAS ERRED IN DELETING THE ADDITIO N MADE ON ACCOUNT OF DIFFERENCE IN THE LOWER SALE PRICE OF C-ORE RECORDED IN THE BOOKS COMPARED TO THE MARKET PRICE AS IS EVIDENT FROM THE PREVAILING MARKET RATE AS PER THE RECORDS OF MMTC THEREBY FOREGOING INCOME IN FAVOUR OF THE B UYER. 3. THE LD.CIT (A) HAS FAILED TO APPRECIATE THAT THE DECISION OF THE ITAT RELIED UPON BY HIM HAS NOT BEEN ACCEPTE D BY THE DEPARTMENT AND FURTHER APPEAL HAS BEEN FILED BE FORE THE HON'BLE HIGH COURT OF KARNATAKA IS PENDING FOR ADJUDICATION. 4. FORTHESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT (A) IN SO FAR AS IT IS RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED. ITA NO. 721/B/17 4 THE LD DR WAS HEARD IN SUPPORT OF THE GROUNDS RAISE D (SUPRA). 3.2 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S ISSUE OF ADDITION IN RESPECT OF SUPPRESSED SALES TO M/S KALY ANI STEEL LTD., MADE ON ACCOUNT OF DIFFERENCE IN THE LOWER SALE PRI CE OF C-ORE RECORDED IN THE BOOKS OF ACCOUNT COMPARED TO THE MA RKET PRICE, HAS BEEN A RECURRING FEATURE YEAR ON YEAR. THIS ISSUE HAS BEEN CONSIDERED BY VARIOUS CO-ORDINATE BENCHES OF THIS T RIBUNAL IN THE ASSESSEES OWN CASE AND DECIDED IN FAVOUR OF ASSES SEE AND AGAINST, REVENUE IN ORDERS FOR ASST. YEAR 2005-06 AND 2006-0 7 IN ITA NO.351/BANG/2011 AND ITA NO.733/BANG/2010 DATED 2/1 1/2012; FOR ASST. YEARS 2008-09 AND 2009-10 IN ITA NOS.808 AND 809/BANG/2012 DATED 10/10/2014 AND IN ITA NO.1496/BANG/2014 DATED 3/8/2015 FOR ASST. YEAR 2010-11. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDER THE MATERIAL ON RECORD, INCLUDING THE JUDI CIAL PRONOUNCEMENTS CITED. THE ONLY ISSUE RAISED IN RE VENUES GROUNDS (SUPRA), IS IN RESPECT OF THE DELETION OF THE ADDIT ION ON ACCOUNT OF SUPPRESSED SALES TO M/S KALYANI STEEL LTD., MADE ON ACCOUNT OF ITA NO. 721/B/17 5 DIFFERENCE IN THE LOWER SALE PRICE OF C-ORE RECORDE D IN THE BOOKS OF ACCOUNT COMPARED TO THE MARKET PRICE. WE FIND THAT THIS ISSUE HAS BEEN RECURRING YEAR ON YEAR IN THE CASE ON HAND AN D THAT THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR ASST. YEAR 2005-06 IN ITS ORDER IN ITA NO.351/BANG/2011 D ATED 2/11/2012; HAD CONSIDERED THIS ISSUE IN DETAIL AND UPHELD THE DELETION OF THE ADDITION BY THE LD CIT(A). THIS FI NDING RENDERED BY THE CO-ORDINATE BENCH FOR ASST. YEAR 2005-06 HAS BE EN FOLLOWED BY VARIOUS CO-ORDINATE BENCHES FOR ASST. YEAR 2006-07 IN ITA NO.733/BANG/2010; FOR ASST. YEAR 2008-09 AND 2009-1 0 IN ITA NOS.808 & 1309/BANG/2012 DATED 10/10/2014 AND FOR A SST. YEAR 2010-11IN ITA NO.1496/BANG/2014 DATE4D 3/8/2015. O N THE IDENTICAL ISSUE, THE CO-ORDINATE BENCH OF THIS TRIB UNAL IN THE ASSESSEES OWN CASE IN ITS ORDER IN ITA NO.351/BANG /2011 DATED 2/11/2012 FOR ASST. YEAR 2005-06 (SUPRA), AT PARA 1 8.4 THEREOF, HAS HELD AS UNDER:- 18.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND FROM THE RECORD THAT THE ASSESSEE HAS FURNISHE D ALL THE DETAILS REQUIRED BY THE ASSESSING OFFICER. ITA NO. 721/B/17 6 FROM THE DETAILS ON RECORD IN RESPECT OF THE ADDITI ONS MADE TO THE RETURNED INCOME ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET PRICE, WE AGRE E WITH THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE PRICE CHARGED FOR C-ORE IS BELOW THE MARKET PRICE. WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS RECORDED THAT KARNATAKA LOK AYUKTA IN ITS REPORT ON THE MINING SCAM ALLEGED MALPRACTICES ON THE PART OF THE OFFICIALS OF THE ASSESSEE COMPANY. FROM THE SUBMISSIONS MADE BY THE ASSESSEE, A GOVT OF KARNATAKA UNDERTAKING, IT CAN BE INFERRED THAT THE SALES OF C-ORE TO KALYANI STEELS LTD ARE SUPPORTED BY INVOICES RAISED, ENTRIES IN THE BOOKS OF ACCOUNTS AUDITED BY CHARTERED ACCOUNTANTS. THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS THE MERCANTI LE SYSTEM AS PER THE PROVISION OF SECTION 145 OF THE A CT AND WE FIND THAT NO FAULT HAS BEEN FOUND THEREIN NO R HAS IT BEEN REJECTED. NOWHERE IN THE ORDER OF ASSESSMENT OR THE MATERIAL ON RECORD DO WE FIND ANYTHING TO ESTABLISH THAT THERE WERE ANY REALIZATI ON ON ACCOUNT OF SALES BEYOND WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. AS PER THE I.T. ACT, 1961 PROFIT S FROM BUSINESS ARE TO BE COMPUTED UNDER SECTION 28 O F THE ACT AS PER THE ACCOUNTING POLICIES MANDATED BY SECTION 145 OF THE ACT WHICH IN THE ASSESSEE'S CASE IS THE MERCANTILE SYSTEM. THE SCOPE OF TOTAL INCOME I S ITA NO. 721/B/17 7 ALSO DEFINED UNDER SECTION 5 OF THE ACT. THE I.T. ACT, 1961 IS VERY CLEAR THAT WHAT IS TO BE TAXED IS THE REAL INCOME OF AN ASSESSEE AND NOT NOTIONAL OR HYPOTHETICAL INCOME AND IT DOES NOT PERMIT AN ASSESSING OFFICER TO COMPUTE INCOME WITHOUT ANY EVIDENCE. THERE IS NO FINDING BY THE ASSESSING OFF ICER THAT THE ASSESSEE HAS SOLD ITS C-ORE AT A PRICE LES S THAN THAT AGREED TO IN THE CONTRACT ENTERED INTO WITH M/ S. KALYANI STEELS LTD OR THAT IT HAS REALIZED FROM M/S . KALYANI STEELS LTD ADDITIONAL AMOUNTS ON SUCH SALES WHICH IT HAD NOT RECORDED IN ITS BOOKS. THE ASSESS EE IS LEGALLY BOUND TO ABIDE WITH THE TERMS OF THE CONTRACTUAL OBLIGATIONS ARISING OUT OF ITS AGREEMEN T TO SELL C-ORE TO M/S. KALYANI STEELS LTD AND THE CONTR ACT ENTERED INTO BEING LEGAL AND VALID, IT CANNOT BE BRUSHED ASIDE. AFTER TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CASE ON THIS ISSUE, WE FIND TH AT NO EVIDENCE WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE ASSESSE E HAS REALIZED FROM THE SALE OF C-ORE TO M/S. KALYANI STE ELS LTD., MORE THAN WHAT IS RECORDED IN THE ASSESSEE'S BOOKS OF ACCOUNT. IN THIS VIEW OF THE MATTER, THE ADDITION MADE ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET RATE, IN OUR CONSIDERED OPINION IS NOT FOUNDED ON SOUND AND ACCEPTED ACCOUNTING AND LEGAL PRINCIPLES AND IS THEREFORE LI ABLE ITA NO. 721/B/17 8 TO BE DELETED. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE DECISION OF THE LEARNED CIT(APPEALS) IN DELETING THE ADDITION OF RS.15,51,45,117. THE GROUNDS AT S.NOS.2 AND 3 RAIS ED BY REVENUE ARE ACCORDINGLY DISMISSED. 3.3.2 WE ARE OF THE VIEW THAT THE FACTS AND CIRCUM STANCES GIVING RISE TO THE APPEAL ON THE ABOVE ISSUE BEFORE US ARE IDENTICAL AS IN THE EARLIER ASST. YEARS 2005-06, 2006-07, 2008-0 9 TO 2010-11 IN THE ASSESSEES OWN CASE AND WHICH CO-ORDINATE BENCH ORD ERS IN THIS REGARD WERE REFERRED TO BY US AT PARA 3.3.1 OF THIS ORDER (SUPRA). FOLLOWING THE AFORESAID DECISIONS OF THE CO-ORDINAT E BENCH OF THIS TRIBUNAL (SUPRA), WE UPHOLD THE ORDER OF THE LD CIT (A) IN DELETING THE ADDITION MADE ON ACCOUNT OF SUPPRESSED PROFITS ON SALE TO M/S KALYANI STEELS LTD. CONSEQUENTLY, THE GROUNDS 1 TO 5 RAISED BY REVENUE (SUPRA) ARE DISMISSED. 4. IN THE RESULT, REVENUES APPEAL FOR ASST. YEAR 2 012-13 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH SEPTEMBER, 2017 . SD/- SD/- (LALIET KUMAR) (JA SON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER ITA NO. 721/B/17 9 BANGALORE DATED : 8/9/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.