Sesa Mining Corporation Limited, Panaji V. ITO, Ward - 2(4), Panaji

ITA 73/PAN/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6506 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 21-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S SHIVSHANKAR
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Additional depreciation; Earning of tax free income; Set aside
• Section: 32; 37; 14A; 115JB; 32(1)(iia); 250; 246A; 22

Judgement Text

।आयकर अपीलȣय अͬधकरण, Ûयायपीठ पणजी, पणजीम Ʌ । IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH : : PANAJI [VIRTUAL HEARING AT PUNE] BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.73/PAN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 Sesa Mining Corporation Limited, Sesa Ghor, 20, EDC Complex, Patto, Panaji, Goa – 403001. PAN: AAACD7444G V s The Income Tax Officer, Ward-2(4), Panaji, Goa. Appellant / Assessee Respondent / Revenue Assessee by Shri Vijay Gupta – Advocate Revenue by Shri P S Shivshankar – CIT(DR) Date of hearing 13/06/2024 Date of pronouncement 14/06/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee against the order of Ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax Act, 1961 dated 30.01.2024. The Assessee has raised the following grounds of appeal : ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 2 “Based on the facts and in the circumstances of the case and in law, Sesa Mining Corporation Limited (hereinafter referred to as "the Appellant”) craves leave to prefer an appeal against the Order dated 30/01/2024 passed by the Commissioner of Income Tax, Appeal ADDL/JCIT (A) Delhi [hereinafter referred to as 'CIT(A)’] under section 250 of the Act on the following grounds: Grounds Against the outright dismissal of the appeal in limine by Commissioner of Income Tax (Appeals) Order (Order dated 30/01/2024): 1.1 That Ld. Commissioner of Income Tax (A) ADDL/JCIT erred in dismissing appeal of the assessee /appellant without giving sufficient opportunity of being heard is totally wrong, bad in law and needs to be quashed. The CIT(A) disposed off the appeal in a hurry and in limine citing reason of non prosecution by the appellant. 1.2 That as per the legal provisions embarking upon the duties and power of the Appellate Commissioner/ Additional/Joint Commissioner as enshrined in section 250-251 of the IT Act, he could not pass the order dismissing the appeal for non prosecution but must have either provided further opportunity to the appellant Or in alternative decided upon the grounds of appeal based upon the material before him and what could further be called in from the assessing officer who passed the impugned order of assessment being subject matter of appeal before the appellate Commissioner/addl./joint commissioner. The appellant relies upon the authority of CIT (Central) Nagpur vs. Prem Kumar Arjundas Luthra (HUF) [2016] [69 taxmann.com 407] (Bombay) wherein it was categorically held that Commissioner (Appeals) cannot dismiss appeal on account of non- prosecution of appeal by assessee as per provision of section 250 & 251 of the Income Tax Act. 1.3 That the Impugned order passed by CIT(A) violates the renowned Legal maxim “Audi altera partem” of principle of natural justice which requires that both parties to a dispute should be given an opportunity to present their case and respond to the arguments made by the opposing party. This principle ensures fairness and ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 3 equity in legal proceedings. 1.4 That It is pertinent to note that at various dates, the appellant was unable to file a reply due to the COVID-19 pandemic or other contingent reasons, which disrupted normal operations and affected the appellant's ability to effectively respond to notices. The extraordinary circumstances arising from the pandemic must be considered in evaluating the appellant's actions and response timelines. 1.5 Inspite of requesting for an adjournment vide email dated 29.01.2024 the CIT(A) did not gave a date of hearing and passed the impugned Order. Grounds on the merits of the issues involving Additions/disallowances made in the Assessment s Order: 2.1 The Learned Assessing Officer erred in law and facts in invoking the vigor’s of section 14A r.w.r. 8D in a mechanical way and without application of mind. The A.O. ought to have appreciated that to invoke the vigor of section 14A r.w.r. 8D there should have been a finding that the Appellant has incurred expenses which is absent in this case nor is there any recording of satisfaction that the Appellant claim was wrong having regard to the Appellant books of account. 2.2 The Learned A.O. erred in disallowing an amount of Rs.86,763/- u/s. 14A of the Act, purportedly as expenditure by way of interest in relation to exempt income, computed in accordance with Rule 8- D(2)(ii) of the Rules. The AO ought to have appreciated that the having regards to the Appellant books of accounts, the Appellant was having sufficient funds for the investment and the Appellant did not have any outstanding loans. Nor the Appellant had made any additional investments during the year. The A.O. ought to have appreciate that the amount on which said disallowance Of Rs.86,763/- has been computed was not the interest envisaged under Rule 8D but was interest paid was on delayed payments of State and Central levies, interest on delay ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 4 payment to Government of Goa under Land Revenue Code, bank guarantee charges, bank charges etc. and the said expenses/charges was specifically for the business of the Appellant and the same were directly relatable exclusively to the Appellants business income. Hence, there could have been no disallowance thereof u/s. 14A r.w.s. 8D of the Act. 2.3 The Learned A.O. erred in disallowing an amount of Rs.2,83,750/- u/s. 14A of the Act, purportedly as the expenditure additionally incurred towards administration in relation to the exempt income, as computed in accordance with Rule 8-D(2)(iii) of the Income tax Rules, 1962. The learned AO ought to have appreciated that the underlying investment were all made utilizing the cash surplus and all of the investments were made in the prior years. The dividends were directly credited to the Appellant’s bank account and the Appellant in one single entry and the Appellant had not incurred any expenditure to earn the same. 3.1 The Learned A.O. erred in disallowing the Appellant’s claim for additional depreciation u/s. 32(1)(iia) of the Act amounting to Rs.36,15,823/- on the plant and machinery acquired and installed by the Appellant during the year for the use in its business of mining and processing of iron ore for the alleged reason that the extraction and processing of iron ore cannot be treated as “manufacture or production” for the purpose of section 32(1 )(iia) of the Act. The A.O. ought to have appreciated that extraction and processing of iron ore has been specifically held by the Supreme Court as “production” in the case of M/s. Sesa Goa Ltd., reported in 271 ITR 331, and that the said decision squarely applies to the Appellant’s claim in this matter. 3.2 The Learned A.O. erred in holding that the aforesaid decision of the Supreme Court is not applicable in view of the amendment by way of introduction of the definition of “manufacture” in section 2(29BA) of the Act, with effect from 1.4.1999. The A.O. ought to have appreciated that the introduction of definition of “manufacture” in section 2(29BA) of the Act, does not affect the definition of word “production” as interpreted by the Supreme ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 5 Court with reference to section 32A of the Act, which section in fact is pari-materia to section 32(1 )(iia) of the Act. 3.3 The Learned A.O. erred in holding that since the word “manufacture or production” are used in section 32(1 )(iia) of the Act, the word “production” should also satisfy the basic condition of manufacture as enumerated in section 2(29BA) of the Act. The A.O. on the contrary ought to have appreciated that the word “production” has a wider connotation than the word “manufacture” and that while every manufacture can be characterized as “production”, the every production need not amount to “manufacture”. 4.1 The Learned AO has disallowed the expenditure towards the stamp duty on renewal of mining lease of Rs.29,16,66,667/- without application of mind. The AO ought to have appreciated that Rs.29,16,66,667/- booked as deferred revenue expenditure during the year which was not claimed as expenditure in profit of the year while computing total Income, the same was deducted and claimed as admissible revenue expenditure as stamp duty paid did not form part of the income tax depreciation u/s 32 nor part of expenditure in profit and loss account of appellant. 4.2 The learned AO erred in disallowing the expenditure towards the stamp duty on renewal of mining lease of Rs.29,16,66,667/- even when the same being paid by the Appellant during the year which is allowable u/s 43B. 4.3 The learned AO eared in disregarding the Circular dated June 23, 1943, in No. 22 (R. Disc. No. 27(53) - I.T./(43) referred in the case CIT vs Panyam Cement and Mineral Industries Ltd. (228 ITR 212). The AO ought to have appreciated that the above circular has clarified that, “Legal expenses incurred in connection with the renewal of lease should be allowed as an admissible deduction for purposes of income-tax provided that the renewal of the lease is for a period of less than fifty years." ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 6 5.1 The Learned A.O. erred in facts and law by disallowing the expenditure of Rs.74,87,567/- incurred by the Appellant holding the same as expenditure u/s 135 of the of the Companies Act 2013. The AO ought to have appreciated that Appellant being in the business of mining which is causing environmental deterioration have to incur expenditure on the village community for its up- liftments to protect its goodwill and to carry on its business in a peaceful manner and thereby increasing its business competitiveness. The said expenditure having been laid out or expended wholly and exclusive for the purpose of its business, the Appellant had claim was deductible u/s. 37 of the Act. 6.1 The Learned A.O. erred in his reasoning that expenditure of Rs.19,04,473/- . incurred by the Appellant as donations and disallowed the same. 6.2 The AO ought to have appreciated that Appellant had incurred the expenditure of Rs.19,04,473/- towards its share of contributions to its mining associations ‘Mineral Foundation of Goa” and “Goa Mining Association” which furthers the interest of the Appellant business. Appellant also had paid for subscription for newspapers and membership fee and the said expenditure was for the purpose of its mining business operations allowable under section 37. 7.1 The AO erred in disallowing Rs.3,70,513/- under section 14A of the Act while computing the book profit under section 115JB of the Act. The AO ought to have appreciated that the appellant had not incurred any expenses in earning exempt income and section 14A was not applicable while computing the book profit under section 115JB of the Act. 7.2 The AO erred in making disallowance under section 14A read with Rule 8D of the rules without appreciating that no disallowance under section 14A of the Act could have been made under section 14A while computing the book profit under section 115JB of the Act. 8.1 The AO erred in making disallowance of Additional depreciation of Rs.36,15,823/- without appreciating that the additional claim of depreciation of the Appellant was under the Income tax Act and not ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 7 under the Company’s Act and no disallowance could have been made on the claim of additional depreciation while computing the book profit under section 115JB of the Act. The Appellant craves leave to add to, amend, alter and/or delete any of the aforesaid grounds of appeal.” Submission of ld.AR : 2. The ld.Authorised Representative(ld.AR) of the assessee submitted that ld.CIT(A)[NFAC] had not adjudicated each ground of the assessee and merely dismissed the appeal of the assessee. Submission of ld.Departmental Representative(ld.DR) : 3. The ld.DR for the Revenue relied on the order of Assessing Officer(AO) and ld.CIT(A)[NFAC]. Findings & Analysis : 4. We have heard both the parties and perused the records. It is observed from the order of the ld.CIT(A)[NFAC] that the ld.CIT(A)[NFAC] did not decide the grounds of appeal on merit but merely dismissed the appeal of the assessee for non- compliance. The ld.CIT(A) has not adjudicated grounds raised by the assessee on merits. ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 8 4.1 The Hon’ble Bombay High Court has held in the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF)(Bombay)/[2017] 297 CTR 614 (Bombay) as under : Quote, “8.From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act. Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 9 assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.” Unquote. 4.2. Thus, the Hon’ble Bombay High Court has categorically held that ld.CIT(A) has to decide the appeal on merit and ld.CIT(A) does not have any power to dismiss appeal for non- prosecution. 5. In view of the above, the order of the ld.CIT(A)[NFAC] is set-aside to ld.CIT(A) for denovo adjudication. The ld.CIT(A) shall provide opportunity of hearing to the assessee. 6. Accordingly, appeal of the assessee in ITA No.73/PAN/2024 is allowed for statistical purpose. Order pronounced in the open Court on 14 th June, 2024. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 14 th June, 2024/ SGR* ITA No.73/PAN/2024 Sesa Mining Corporation Limited [A] 10 आदेश कᳱ ᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, पणजी बᱶच, नागपुर/ DR, ITAT, Bench, Panaji. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.