M/s ILC Industries, Hospet V. Pr. CIT, Bangalore

ITA 847/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9230 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Search and seizure; Bad and doubtful debts; Revised return; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 153A; 263; 139

Judgement Text

ITA.847 & 848/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER I.T.A NOS.847 & 848/BANG/2015 (ASSESSMENT YEARS: 2007-08 & 2008-09) M/S. ILC INDUSTRIES LIMITED, D 6/7, NEAR INDUSTRIAL ESTATE, DAM ROAD, HOSPET 583 203 .. APPELLANT PAN : AABCI0361A V. PR. COMMISSIONER OF INCOME TAX, (CENTRAL), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. ZAIN AHMED KHAN, CA REVENUE BY : SHRI. SUNIL KUMAR VERMA, CIT - DR HEARD ON : 28.09.2016 PRONOUNCED ON : 09.12.2016 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE PR. CIT (CENTRAL), PASSED U/S.263 OF THE IT ACT, 1961, DT.25.03.2015 AND 30.03.2015, FOR THE ASSESSMENT YEARS 2007-08 AND 20 08-09 RESPECTIVELY. 02. THE FACTS IN BRIEF ARE THAT THE ASSESSEE CO MPANY, IS ENGAGED IN LOGISTICS, MINING, TRADING OF IRON ORE AND RETAILI NG OF PETROLEUM PRODUCTS. ITS ASSESSMENT U/S. 153A RWS 143(3) FOR AY 2007-08 WAS COMPLETED ON 31.03.2013 ACCEPTING THE RETURNED INCOME . ON A RE VIEW OF RECORDS, THE PR. ITA.847 & 848/BANG/2015 PAGE - 2 COMMISSIONER OF INCOME TAX, (CENTRAL), (PCIT(C)), B ENGALURU, NOTICED THAT THE ASSESSEE HAD ENTERED INTO AN MOU WITH RIPPLE IN VESTMENTS LTD ON 04.08.2005 TO PURCHASE UPTO 25 LAKH SHARES OF VALUE MART INFO TECHNOLOGIES LTD @ RS.4 PER SHARE THROUGH RIPPLE IN VESTMENTS LTD FOR RS. 1 CRORE. IN CONTINUATION TO THAT MOU, ON 12.6.2006, IT ENTERED INTO AN M0U WHEREIN RIPPLE INVESTMENTS LTD WAS TO BUY BACK THE 25 LAKH SHARES @ RS. 8 PER SHARE. DURING A Y 2006-07, IT HAS WR ITTEN OFF THE INVESTMENT TO THE EXTENT OF RS. 1 CRORE AND CLAIMED IT AS A REVENUE EXPENDITURE. IN THE ASSESSMENT MADE FOR AY 2006-07 U/S.143(3) DATED 31.12.2008, THE ASSESSING OFFICER HAS DISALLO WED THAT RS. 1 CRORE STATING THAT IT IS A CAPITAL EXPENDITURE AN D HENCE IT WAS NOT ALLOWED AS AN EXPENDITURE TO BE CHARGED TO THE P & L ACCOUNT UNDER SECTION 37(1). THIS ORDER ATTAINED FINALITY AS THE ASSESSEE HAS NOT CONTESTED IT AT ALL. 03. CONSEQUENT TO A SEARCH AND SEIZURE ACTION, THE ASSESSEE WAS REQUIRED TO FILE A RETURN UNDER SEC. 153A. IN ITS R EVISED RETURN FILED FOR A Y 2007-08, THE ASSESSEE , INTER ALIA, CRED ITED RS. 60 LAKHS RECEIVED FROM VALUEMART INFO TECHNOLOGIES LTD ON 31.03.2007 AS 'INCOME FROM OTHER SOURCES ( AS BAD DEBTS RECOVER ED )' IN ITS P& L A/C BUT REDUCED RS.1 CRORE IN THE COMPUTATION MEMO A ND ARRIVED ITS TOTAL INCOME. IN THE ASSESSMENT MADE U/S. 153A RWS 143(3 ) FOR AY 2007-08 ON 31.03.2013, THE AO ACCEPTED SUCH RETURNED INCOME. ITA.847 & 848/BANG/2015 PAGE - 3 04. THE PR. COMMISSIONER OF INCOME TAX, (CENTRAL), BENGALURU CONSIDERED THAT THE ABOVE ACTION OF THE ASSESSING OFFICER, I.E ACCEPTING THE SAID CLAIM OF THE ASSES SEE IN A Y 2007-08 IN THE ASSESSMENT ORDER PASSED U/S. 153A R WS 143(3), IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE AND HENCE ISSUED NOTICE UNDER SECTION 263 TO THE ASSESSEE. AFTER HEARING THE ASSESSEE, CO NSIDERING THE RELEVANT MATERIALS ETC, THE PCIT(C) HELD THAT I T IS AN UNDISPUTED FACT THAT IN THE RETURN FOR AY 2006-07 , THE ASSESSEE CLAIMED RS. 1 CRORE PAID FOR SHARES OF M/S. VALUEMA RT INFORMATION TECHNOLOGIES LIMITED AS 'WRITTEN OFF'. WHILE COMPL ETING THE ASSESSMENT, THE A O DISALLOWED IT WHICH HAS BECOME FINAL. THE ASSESSEE RECOVERED RS. 60 LAKHS DURING THE PERIOD RELEVANT TO A Y 2007-08 & RS. 40 LAKHS DURING THE PERIOD RELEVAN T TO A Y 2008-09 AND CLAIMED THE ENTIRE RS. 1 CRORE IN ITS R EVISED RETURN FILED FOR A Y 2007-08 IN THE COMPUTATION MEMO WHIC H IS AN INCORRECT CLAIM, NOT ALLOWABLE AND FALSE. THE ASSES SEE ALSO ARGUED THAT WHEN ITS CLAIM OF WRITE OFF OF RS.ONE CRORE AS AN EXPENDITURE IS NOT ALLOWED AS A DEDUCTION IN AY 2006- 07 ON THE GROUND THAT IT WAS CAPITAL IN NATURE, SUBSEQUENTLY, WHEN SUCH AMOUNTS ARE RECOVERED BY IT AND WAS OFFERED AS AN INCOME IN THE AYS 2007-08 AND 200 8-09 , THEN SUCH RECEIPTS SHOULD ALSO BE TREATED AS CAPITA L IN NATURE &THEY SHOULD BE REDUCED FROM THE INCOME OF R ESPECTIVE ITA.847 & 848/BANG/2015 PAGE - 4 YEARS. IN THIS REGARD, THE PR.CIT HELD THAT FOR THE SAKE OF ARGUMENT, IF IT IS CONSIDERED THAT THE ASSESSEE HA S RECOVERED RS. 60 LAKHS IN AY 2007-08 AND OFFERED I T AS AN INCOME, EVEN THEN , THERE IS AN EXCESS CLAIM OF DE DUCTION OF RS. 40 LAKHS IN THAT AY. THUS, THE ACCEPTANCE OF SUCH CLAIM BY THE A O IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO T HE INTERESTS OF REVENUE. THE PCIT( C) ALSO HELD THAT WHILE COMPLET ING THE ASSESSMENT , THE A O FAILED TO MAKE NECESSARY VERIF ICATION, THERE IS NO APPLICATION OF MIND, ON THESE COUNTS A LSO, THE ASSESSMENT ORDER PASSED BY THE A O IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND PLACED RELIANCE ON THE FOLLOWING DECISIONS :- 1. CIT VS JAWAHAR BHATTACHARJEE, 341 ITR 434(GAU)(F.B. ) AND 2. ASSAM TEA HOUSE 344 ITR 507 (P&H). 06. THUS, THE PCIT( C) HELD THAT THE ASSUMPTION O F JURISDICTION U/S.263 IS FULLY JUSTIFIED BOTH ON M ERITS AND FACTS . IN VIEW OF THAT, HE SET ASIDE THE ASSESSMEN T ORDER ON THIS SPECIFIC ISSUE TO THE FILE OF THE AO TO RE-EXA MINE THE CLAIM OF THE ASSESSEE AND DECIDE IN ACCORDANCE WITH LAW AF TER GIVING A REASONABLE AND SUFFICIENT OPPORTUNITY TO THE ASSESS EE. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL WITH FOLLOWING GROUN DS OF APPEAL : ITA.847 & 848/BANG/2015 PAGE - 5 07. THE AR SUBMITTED THAT THE PR. CIT HAS RENDERED THE IMPUGNED ASSESSMENT ORDER AS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE ON THE PREMISE THAT THE AO HAS NOT EXAMINED THE IMPUGNED RECLAIM OF INVESTMENT WRITTEN OFF . IT IS NOT IN DISPUTE THAT THE ASSESSEE FILED THE RETURN I N RESPONSE TO NOTICE UNDER SEC. 153A ALONG WITH THE STATEMENT OF TOTAL INCOME, THE AO DIRECTED IT TO FILE ITS FINANCIAL STATEMENTS ALONG WITH ALL ANNEXURES & ASSESSMENT ORDER OF EARLIER YEARS ETC. THE ASSESSEE HAS FURNISHED BEFORE THE AO THE STATEMENT OF TOTAL INCO ME WHICH CLEARLY DISCLOSED THE DEDUCTION CLAIMED BY IT. ON THE DIREC TIONS OF THE AO, IT HAS ALSO FURNISHED FINANCIAL STATEMENTS AND ASSESSM ENT ORDERS OF EARLIER YEARS. ALL OF THEM POINTS TO THE FACT THAT THE AO HAS MADE AN ITA.847 & 848/BANG/2015 PAGE - 6 ENQUIRY WITH RESPECT TO THE CLAIM OF INVESTMENT WRI TTEN OFF FOR THE A Y 2006-07, DISALLOWANCE OF THE SAME IN THAT YEAR, SUBSEQUENT RECOVERY OF INVESTMENT AND THEN THE RECLAIM OF INVE STMENT WRITTEN OFF IN A Y 2007-08. IN EFFECT, THE AO COMPLETED THE AS SESSMENT PROCEEDINGS UNDER SEC. 153A R.W.S. 143(3) AFTER TAKING DUE COGN IZANCE ALL OF THEM AND FOUND THEM TO BE IN ACCORDANCE WITH LAW. WHERE AN ENQUIRY WAS HELD BY THE AO AND THE DETAILS/DOCUMENTS SOUGHT FO R WAS DULY PROVIDED AND ACCEPTED, JUST BECAUSE THE SAME DOES N OT FIND A MENTION IN THE ASSESSMENT ORDER, THE PR. CIT CANNOT ASSUME JURISDICTION UNDER SEC. 263 ON THE GROUND THAT THE ASSESSMENT ORDER WA S MADE WITHOUT CONDUCTING ANY ENQUIRY. THUS, THE AR SUBMITTED THAT THE BASIS ON WHICH THE PR. CIT HAS COME TO THE CONCLUSION THAT THE IMP UGNED ORDER IS ERRONEOUS, IS CONTRARY TO THE FACTUAL POSITION, THE CONDITION PRESCRIBED U/S. 263 HAS NOT BEEN SATISFIED AND HENC E THE ORDER OF THE PR.CIT IS LIABLE TO BE QUASHED. HE ALSO PLACED REL IANCE ON THE DECISIONS, VIZ MALABAR INDUSTRIAL CO LTD VS CIT 243 ITR 0083 S C , CIT VS ANIL KUMAR SHARMA 335ITR 083 DELHI, CIT VS SUNBEAM AUTO LTD 227 CTR 133 DELHI , CIT VS VIKAS POLYMERS 194 TAXMAN 57 DEL HI, KELVINATOR OF INDIA 320 ITR 561 SC ETC. 08. PER CONTRA, THE DR SUBMITTED THAT IN THE ASSES SMENT MADE U/S 153A R.W.S. 143(3) FOR AY 2007-08, THE ASSESSEE CAN NOT MAKE ANY FRESH CLAIM AS WAS DONE BY IT . IN THIS REGARD, THE DR RELIED ON ITA.847 & 848/BANG/2015 PAGE - 7 THE THE HON'BLE ITAT , PUNE B BENCH DECISION IN THE CASE OF SHRI SHANKAR JUNJHUNWALA V ACIT , CENTRAL CIRCLE, AURANG ABAD IN ITA 225/PN/2004-05 DT 31.07.2012 WHEREIN FOLLOWING THE SPECIAL BENCH DECISION OF THE THE HON'BLE ITAT, MUMBAI IN ITA NOS 5018 TO 5022 & 5059 /M/10 DT 06.07.12 IN AL CARGO GLOBAL LOGISTICS V DCIT , CENT CIRCLE 44, MUMBAI IT HELD THAT THE ASSESSMENT MADE U/S 153A IS TO BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIA L, AND THE RETURN FILED BY THE ASSESSEE U/S 139 ATTAINED FINALITY. IN OTHER WORDS, THE DR SUBMITTED THAT A NEW CLAIM OF DEDUCTION OR ALLO WANCE COULD NOT BE ENTERTAINED IN THE REASSESSMENT PROCEEDINGS AND HENCE THE ORDER OF THE PR.CIT IS IN ACCORDANCE WITH LAW. 09. WE HEARD THE RIVAL CONTENTIONS. THE FACTS RE MAIN THAT DURING A Y 2006-07, THE ASSESSEE HAS WRITTEN OFF THE INVE STMENT OF RS. ONE CRORE & CLAIMED IT AS A REVENUE EXPENDITURE. IN T HE ASSESSMENT MADE FOR AY 2006-07 U/S.143 (3) DATED 31.12.2008, T HE A O HAS DISALLOWED IT AS A CAPITAL EXPENDITURE AND THAT ORD ER HAD ATTAINED FINALITY. OUT OF THAT ONE CRORE , THE ASSESSEE RECOVERED R S. 60 LAKHS ON 31.03.2007, IE DURING THE PERIOD RELEVANT TO THE A Y 2007-08 & RS. 40 LAKHS ON 03.04 & 30.4.2007, IE DURING THE PERIOD RE LEVANT TO THE A Y 2008-09. ALTHOUGH, THE ASSESSEE HAS RECOVERED RS. 6 0 LAKHS ONLY IN AY 2007-08, RECOGNIZED IT AS AN INCOME & CREDITED IT I N ITS P & L ACCOUNT, BUT CLAIMED A DEDUCTION OF RS. ONE CRORE IN THE CO MPUTATION MEMO OF ITS ITA.847 & 848/BANG/2015 PAGE - 8 REVISED RETURN , THEN ARRIVED THE TOTAL INCOME AND DECLARED SUCH TOTAL INCOME WHICH WAS ULTIMATELY ACCEPTED BY THE AO IN T HE IMPUGNED ASSESSMENT ORDER. SUCH AN ACTION IS NOT CORRECT AS PER THE RATIO RELIED ON BY THE DR, SUPRA. THUS, THERE IS AN ERROR IN THE I MPUGNED ASSESSMENT ORDER. ALTERNATIVELY, AS HELD BY THE PR. CIT, EVEN IF THE ASSESSEES ARGUMENT THAT WHEN ITS CLAIM OF WRITE OFF AT RS O NE CRORE AS AN EXPENDITURE IS NOT ALLOWED AS A DEDUCTION IN AY 2 006-07 ON THE GROUND THAT IT WAS CAPITAL IN NATURE, SUBSEQUENTL Y , WHEN SUCH AMOUNTS ARE RECOVERED BY IT & WAS OFFERED AS AN INC OME IN THE AYS 2007-08 AND 2008-09 , THEN SUCH RECEIPTS SHOULD ALS O BE TREATED AS CAPITAL IN NATURE & THEY SHOULD BE REDUCED FROM THE INCOME OF THE RESPECTIVE YEAR IS CONSIDERED IN ITS FAVOUR, EVEN T HEN, THE ASSESSEE HAS RECOVERED RS. 60 LAKHS ONLY IN AY 2007-08 AND OF FERED IT AS AN INCOME IN THAT AY. HOWEVER, IT CLAIMED A DEDUCTIO N OF RS. ONE CRORE WHICH WAS ACCEPTED BY THE AO IN THE IMPUGNED ASSESSMENT O RDER. THUS, AN EXCESS DEDUCTION OF RS. 40 LAKHS WAS ALLOWED TO TH E ASSESSEE IN AY 2007- 08, WHICH IS AN ERROR AND IT CLEARLY FALLS WITHIN T HE SCOPE OF SECTION 263 OF THE ACT. THUS, THE FACTS OF THIS CASE ARE DISTI NGUISHABLE VIS -A -VIS THE CASES RELIED ON BY THE ASSESSEE. IN VIEW OF THA T WE DO NOT FIND ANY MERIT IN THE ASSESSEES GROUNDS OF APPEAL AND HENCE THEY ARE DISMISSED. ITA.847 & 848/BANG/2015 PAGE - 9 I.T.A NO 848/BANG/2015/A Y 2008-09 : 10. THE ASSESSEES ASSESSMENT FOR AY 2008-09 WAS C OMPLETED U/S. 153A RWS 143(3) ON 31.03.2013. THE GOVERNMENT OF I NDIA APPOINTED A COMMISSION OF ENQUIRY UNDER THE CHAIRMANSHIP OF SHR I M B SHAH, FORMER JUDGE OF SUPREME COURT. THIS COMMISSION HAS, INTER ALIA, INVESTIGATED INTO THE ISSUE OF UNDER INVOICING OF E XPORT PRICE OF IRON IN THE STATE OF GOA. FROM ITS REPORT, THE PR. CIT NOTICED THAT THE ASSESSEE SHIPPED THE CONSIGNMENT OF IRON LUMPS TO C HINA AT A PRICE WHICH IS BELOW THE AVERAGE SALE OF FOB PRICE OF THE SAME GRADE OF IRON ORE ON THE SAME DAY. AT PAGE NO.187 OF VOLUME 2 OF THAT REPORT , IT HAS BEEN STATED THAT THIS COMPANY HAD SHIPPED A CONSIGNMENT OF IRO N LUMPS TO CHINA ON 21.04.2007 WEIGHING 50,650 METRIC TONNES AND FOB VA LUE OF RS.9,90,33,413/-. THE FOB RATE PER WEIGHING METRIC TONNE AMOUNTED TO RS,1,955/- (UNDER INVOICING TO THE EXTENT OF 53%). THE EXTENT OF UNDER INVOICING WAS CALCULATED ON THE BASIS OF INFORMATIO N PROVIDED BY THE CUSTOMS DEPARTMENT OF MARMAGAO AND PANJIM PORTS FOR THE YEAR 2008-09. THE REPORT BY THE SHAH COMMISSION REPORT IS ON THE BASIS OF AVERAGE SALE FOB PRICE FOR THE SAME GRADE OF IRON ON THE SAME DA Y SINCE IT IS BASED ON THE AVERAGE FREIGHT ON BOARD (FOB). ON A REVIEW OF RECORDS, THE PR CIT NOTICED THAT THE A O HAS NOT VERIFIED THE PRICI NG ADOPTED BY THE ASSESSEE WHILE MAKING EXPORTS SO AS TO EXAMINE WHETHER THERE IS ANY UNDER INVOICING RESORTED BY THEM. THE A O DID N OT MAKE ANY ENQUIRIES/VERIFICATION AND RECONCILIATION OF SALES. SINCE THE A O, WHILE ITA.847 & 848/BANG/2015 PAGE - 10 COMPLETING THE ASSESSMENT, HAS NOT CONSIDERED THE I SSUE OF UNDER INVOICING BY CONDUCTING NECESSARY ENQUIRIES, THE PR . CIT CONSIDERED THAT THE ACTION OF THE A O RESULTED IN UNDER ASSESS MENT AND THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF R EVENUE AND HENCE ISSUED A SHOW CAUSE NOTICE UNDER SECTION 263 TO THE ASSESSEE. AFTER HEARING THE ASSESSEE, CONSIDERING THE RELEVANT MATE RIALS ETC, THE PCIT(C) HELD THAT THE ASSESSING OFFICER COMPLETELY FAILED TO EXAMINE THE UNDER INVOICING ASPECT WHILE COMPLETING THE ASSESSM ENT. FAILURE TO MAKE ENQUIRIES, WHERE SUCH AN ENQUIRY IS WARRANTED WOULD CONSTITUTE PREJUDICE TO THE REVENUE, WHETHER ANY UNDERSTATEMEN T OF INCOME IS OTHERWISE INFERABLE OR NOT. PREJUDICE TO THE REVENU E CAN BE INFERRED NOT ONLY WHERE AN INCOME WHICH SHOULD HAVE BEEN BROUGHT TO TAX HAS NOT BEEN SO BROUGHT, BUT ALSO WHERE THERE HAS BEEN NO E NQUIRY IN MATTERS WHICH WARRANTS ENQUIRY. THEREFORE, THE ACTION OF TH E A O ALLOWING THE EXPORTS WITHOUT ANY ENQUIRY AMOUNTED TO THE ASSESSM ENT ORDER BEING NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO TH E REVENUE. WHILE DOING SO, THE PR. CIT RELIED ON THE RATIOS OF SHREE MANJUNOTHESWARE PACKING PRODUCTS AND CAMPHOR WORKS [1998] 231 ITR 53 SUPREME COURT, CIT VS ASSAM TEA HOUSE, 344 ITR 507 (P&H), SADIQ SHEIKH (ITA NOS.170 & 172/PNJ/2014 AND ITA NOS.171 & 173/P NJ2014 ASST.YEARS 2006-07 & 201041) THE HON'BLE ITAT PANAJI BENCH . T HUS, THE PR. CIT SET ASIDE THE ASSESSMENT ORDER ON THIS SPECIFIC ISS UE TO THE FILE OF THE A O. HE HELD THAT THE ASSESSEE CAN DEMONSTRATE BEFORE THE A O THAT THE SAID TRANSACTION MENTIONED IN THE SHOW CAU SE NOTICE DID NOT ITA.847 & 848/BANG/2015 PAGE - 11 PERTAIN TO THEM BY PRODUCING NECESSARY EVIDENCES AN D MATERIALS AS EXPLAINED IN THEIR SUBMISSION. THE AO SHOULD DUL Y CONSIDER SUCH EVIDENCE AND MAKE NECESSARY ENQUIRIES AND COMPLETE THE ASSESSMENT IN ACCORDANCE WITH LAW BY GIVING REASONA BLE AND SUFFICIENT OPPORTUNITY TO THE ASSESSE BEFORE COMPLE TING THE ASSESSMENT. AGGRIEVED, THE ASSESSEE FILED THIS APPEAL WITH FOLL OWING GROUNDS OF APPEAL : ITA.847 & 848/BANG/2015 PAGE - 12 11. THE AR SUBMITTED THAT DURING THE PROCEEDINGS UN DER SEC. 153A R.W.S. 143(3), THE AO HAS DIRECTED THE ASSESSEE TO FURNISH SHIPMENT WISE DETAILS OF SALES MADE DURING THE YEAR, WHICH W ERE DULY FURNISHED VIDE REPLY DATED 24-DEC-2012 (ENCLOSED IN PAGE 11 TO 15 OF THE PAPER BOOK). SUBSEQUENTLY, IT FURNISHED THE FOL LOWING DETAILS IN CONNECTION WITH THE EXPORTS MADE DURING THE YEAR: A. DETAILS OF IRON ORE EXPORTED (MONTH WISE) IN ABS TRACT WITH THE FOLLOWING INFORMATION: A. DETAILS OF SHIPMENT B. NAME AND ADDRESS OF THE BUYER C. DATE OF SALES CONTRACT ALONG WITH COPY OF SALE CONT RACT / LETTER OF CREDIT D. CONTRACT QUANTITY AND DESCRIPTION OF COMMODITY (MTS AND FE%) E. BASE PRICE/ANY PENALTY OR BONUS OF SHIPMENT RECEIVE D F. PORT OF LOADING/LOADED PORT CERTIFICATE OF QUANTITY , WEIGHT G. DEMURRAGE CHARGES B. ENCLOSED THE FOLLOWING DOCUMENTS PERTAINING TO E ACH SHIPMENT A. COPY OF SALE AGREEMENT / LETTER OF CREDIT B. COPIES OF PROVISIONAL AND FINAL INVOICE C. COPIES OF CERTIFICATE OF WEIGHT AND QUALITY ISSUED AT LOAD PORT D. COPIES OF CIQ CERTIFICATE ISSUED AT DISCHARGE PORT ACKNOWLEDGED COPY OF THE SUBMISSIONS IS ENCLOSED IN PAGE 17 TO 21 OF THE PAPER BOOK. FROM THEM, THE LD. AR SUBMITTED THAT TH E AO HAS MADE A DETAILED ENQUIRY WITH RESPECT TO THE EXPORT SALES A ND IN DOING SO HAS EXAMINED THE NAMES AND ADDRESSES OF THE BUYERS, SAL ES CONTRACTS, LETTERS OF CREDIT, PROVISIONAL AND FINAL INVOICES R AISED BY THE ASSESSEE ON THE BUYERS AMONG OTHER DOCUMENTS. IN EFFECT, THE AO HAS GOTTEN INTO THE ASPECTS OF PRICING AND INVOICIN G. THE PR. CIT HAS RELIED ON THE REPORT OF THE SHAH COMMISSION ON ILLEGAL MIN ING OF IRON AND ITA.847 & 848/BANG/2015 PAGE - 13 MANGANESE ORE IN THE STATE OF GOA PUBLISHED IN THE MONTH OF OCTOBER 2013 TO CONCLUDE THAT PREJUDICE HAD BEEN CAUSED TO THE I NTERESTS OF THE REVENUE ON ACCOUNT OF UNDER-INVOICING RESORTED TO B Y THE APPELLANT. THE SHAH COMMISSION HAS DEALT WITH THE ISSUE OF UND ER INVOICING, EVASION OF TAXES, DUTIES AND OTHERS IN CHAPTER II OF ITS RE PORT (ENCLOSED IN PAGE 3 - 10 OF THE PAPER BOOK). ON PAGE 51 OF ITS R EPORT (ENCLOSED IN PAGE- 3), IT IS STATED THAT: 'THE COMMISSION WAS NOT IN A POSITION TO FINALIZE ILLEGALITY AND IRREGULARITY WITH REGARD TO THE EXPO RT OF IRON ORE BY THE LESSEES OR THEIR REPRESENTATIVES OR TRAD ERS COMPREHENSIVELY DUE TO TIME CONSTRAINS. 12. FURTHER, ON PAGE 52, IT IS STATED THAT : 'THE AFORESAID ASPECT IS FURTHER REQUIRED TO BE INVESTIGATED BY THE CENTRAL INVESTIGATING AGENCIES UNDER THE FOREIGN EXCHANGE MANAGEMENT ACT (FEMA), MONEY LAUNDERING ACT, ETC. PREFERABLY BY ENFORCEMENT DIRE CTORATE AND THE INCOME TAX DEPARTMENT.' WHAT EMANATES FROM THE ABOVE IS THAT THE FINDINGS O F SHAH COMMISSION ARE TENTATIVE AND REQUIRE FURTHER INVEST IGATION. IN OTHER WORDS, THE SHAH COMMISSION HAS NOT CONCLUSIVELY HEL D THAT THE APPELLANT OR ANY OF THE OTHER PARTIES HAVE INDEED R ESORTED TO UNDER INVOICING. IN THE ABSENCE OF ANY CONCLUSIVE FINDING , THE PR. CIT HAS RELIED ON THE REPORT OF THE SHAH COMMISSION TO CONC LUDE THAT THE APPELLANT HAS UNDER INVOICED ITS SALES THAT HAS CAU SED PREJUDICE TO THE INTERESTS OF THE REVENUE. THE PR. CIT OUGHT TO HAVE MADE AN INDEPENDENT ENQUIRY TO SATISFY HIMSELF THAT THE APPELLANT HAD RESORTED TO UNDER INVOICING THAT HAS CAUSED PREJUDI CE TO THE ITA.847 & 848/BANG/2015 PAGE - 14 INTEREST OF THE REVENUE. MERELY RELYING ON THE REPO RT OF SHAH COMMISSION, WHICH IN ITSELF IS INCONCLUSIVE TO RECO RD SATISFACTION WILL NOT SATISFY THE REQUIREMENTS LAID DOWN IN SEC. 263. THE AR DISTINGUISHED THE JUDGEMENT OF HON'BLE INCOME TAX APPELLATE TRIBU NAL, PANAJI IN THE CASE OF SADIQ SEIKH IN ITA NOS. 170 & 172/PNJ/2 014 AND ITA NOS. 171 & 173/PNJ/2014 VIZ IN THAT CASE OF SADIQ SEIKH, THE ASSESSEE HAD FAILED TO SUBMIT ANY REPLY TO THE QUER Y RAISED BY THE AO. THE AO WAS COMPLETELY DEBARRED FROM MAKING ANY EXAMINATION OF THE IMPUGNED TRANSACTION. WHEREAS IN ITS CASE, THE APPELLANT DULY FURNISHED THE SPECIFIC DETAILS TO THE AO WHIC H WERE CAREFULLY EXAMINED BY HIM WHILE COMPLETING THE ASSESSMENT PROCEEDINGS. THE IMPUGNED EXPORT OF 50,650 MT OF IRON ORE SHIPPED ON 21 ST AP RIL 2007 WHERE THE APPELLANT IS ALLEGED TO HAVE RESORTED TO UNDER INVOICING WAS SOLD TO M/S. SINOSTEEL INTERNATIONAL MACAO COMMERCIAL OFFSHORE LIMITED. SINOSTEEL CORPORATION IS A CENTRAL STATE OWNED ENTERPRISE OF THE GOVERNMENT OF PEOPLE' S REPUBLIC OF CHINA AND M/S. SINOSTEEL INTERNATIONAL MACAO COMMER CIAL OFFSHORE LIMITED ('SINOSTEEL INTERNATIONAL') TO WHOM THE IMP UGNED EXPORT HAS BEEN MADE IS ONE OF ITS SUBSIDIARY. ONE OF THE OBSERVATIONS MADE BY THE SHAH COMMISSION ON PAGE 51 OF ITS REPOR T IS THAT SOME OF THE COMPANIES HAVE THEIR OWN FRONT OR ASSOCIATED COMPAN IES REGISTERED OUTSIDE INDIA AND EXPORTING THE IRON ORE TO SUCH CO MPANIES FROM THEIR MOTHER COMPANY AT LOW RATE. IN THE INSTANT CASE, SI NOSTEEL INTERNATIONAL IS A CHINESE GOVERNMENT ENTERPRISE AND NOT A FRONT OR ASSOCIATED ITA.847 & 848/BANG/2015 PAGE - 15 COMPANY OF THE APPELLANT. THE APPELLANT WOULD NOT S TAND TO BENEFIT IN ANY MANNER BY EXPORTING THE IRON ORE TO A CHINESE GOVERNMENT ENTERPRISE FOR A PRICE LESS THAN THE PRE VALENT MARKET PRICE. CONSIDERING THE ABOVE, THE PR. CIT OUGHT NOT TO HAVE CONCLUDED THAT PREJUDICE IS CAUSED TO THE INTERESTS OF THE REVENUE ON ACCOUNT OF UNDER- INVOICING TO A STATE-OWNED ENT ERPRISE ETC. 13. THUS, THE AR SUBMITTED THAT THE BASIS ON WHICH THE PR. CIT HAS COME TO THE CONCLUSION THAT THE IMPUGNED ORDER IS E RRONEOUS, IS CONTRARY TO THE FACTUAL POSITION, THE CONDITION PRE SCRIBED U/S. 263 HAS NOT BEEN SATISFIED AND HENCE THE ORDER OF THE P R.CIT IS LIABLE TO BE QUASHED. HE ALSO PLACED RELIANCE ON THE DECISIONS, VIZ MALABAR INDUSTRIAL CO LTD VS CIT 243 ITR 0083 SC , CIT VS A NIL KUMAR SHARMA 335ITR 083 DELHI, CIT VS SUNBEAM AUTO LTD 227 CTR 1 33 DELHI , CIT VS VIKAS POLYMERS 194 TAXMAN 57 DELHI, KELVINATOR O F INDIA 320 ITR 561 SC ETC. 14. WE HEARD THE RIVAL CONTENTIONS AND GONE THROU GH RELEVANT MATERIAL. THE FACTS REMAIN THAT THE IMPUGNED ASSESSMENT WAS C OMPLETED U/S. 153A RWS 143(3) ON 31.03.2013. THE GOVERNMENT OF INDIA APPOINTED A COMMISSION OF ENQUIRY UNDER THE CHAIRMANSHIP OF SHR I M B SHAH, FORMER JUDGE OF SUPREME COURT, ON ILLEGAL MINING OF IRON A ND MANGANESE ORE IN THE STATE OF GOA. THE SHAH COMMISSION PUBLISHED ITS REPORT IN THE MONTH OF OCTOBER 2013 ONLY, IE AFTER THE COMPLETION OF THE I MPUGNED ASSESSMENT. IT ITA.847 & 848/BANG/2015 PAGE - 16 DEALT WITH THE ISSUE OF UNDER INVOICING, EVASION OF TAXES, DUTIES AND OTHERS. AT PAGE NO.187 OF VOLUME 2 OF THAT REPORT, IT HAS BEEN STATED THAT THE ASSESSEE COMPANY HAD SHIPPED A CONSIGNMENT OF IRON LUMPS TO CHINA ON 21.04.2007 WEIGHING 50,650 METRIC TONNES A ND FOB VALUE OF RS.9,90,33,413/-. THE FOB RATE PER WEIGHING METRIC TONNE AMOUNTED TO RS,1,955/- (UNDER INVOICING TO THE EXTENT OF 53%). THE EXTENT OF UNDER INVOICING WAS CALCULATED ON THE BASIS OF INFORMATIO N PROVIDED BY THE CUSTOMS DEPARTMENT OF MARMAGAO AND PANJIM PORTS FOR THE YEAR 2008-09. THE SHAH COMMISSION REPORT IS ON THE BASIS OF AVERA GE SALE FOB PRICE FOR THE SAME GRADE OF IRON ON THE SAME DAY SINCE IT IS BASE D ON THE AVERAGE FREIGHT ON BOARD (FOB). ON A REVIEW OF RECORDS, THE PR CIT FOUND THAT THE AO HAS NOT VERIFIED THE PRICING ADOPTED BY THE ASSE SSEE WHILE MAKING EXPORTS SO AS TO EXAMINE WHETHER THERE IS AN Y UNDER INVOICING RESORTED BY THEM. THE A O DID NOT MAKE AN Y ENQUIRIES/VERIFICATION AND RECONCILIATION OF SALES. SINCE THE A O HAS NOT CONSIDERED THE ISSUE OF UNDER INVOICING BY COND UCTING NECESSARY ENQUIRIES, ON THE TRANSACTIONS RECORDED BY THE SHAH COMMISSION, THE PR. CIT HELD THAT HIS ACTION RESULTED IN UNDER ASSE SSMENT AND THE SAME IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. ON THE OTHER HAND, THE ASSESSEE COULD NOT FURNISH ANY MAT ERIAL TO DISLODGE THE FINDINGS OF THE PR. CIT TO SAY THAT THE AO HAS EXAMINED THIS ISSUE AND THEN RECORDED HIS FINDINGS IN THE IMPUGNE D ORDER. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V INFOSYS TECHNOLOGIES LTD 17 TAXMANN.COM 203 (KAR), HELD AS AN UNDER : ITA.847 & 848/BANG/2015 PAGE - 17 24. IN THE PRESENT SITUATION, THE COMMISSIONER HAV ING ONLY DIRECTED THE ASSESSING AUTHORITY TO COMPUTE IT OR R E-COMPUTE IT AND MAKE IT EXPLICIT AS TO THE ENTITLEMENT OF THE A SSESSEE, AN ORDER OF THIS NATURE, IN FACT, COULD NOT HAVE BEEN CONTENDED AS DETRIMENTAL TO THE INTEREST OF THE ASSESSEE, AS IT WAS ALWAYS OPEN TO THE ASSESSEE TO JUSTIFY THE CLAIM IN TERMS OF TH E DOUBLE TAXATION AVOIDANCE AGREEMENTS. IN A SITUATION OF TH IS NATURE, WE ARE ALSO OF THE OPINION THAT IT WAS NOT A CASE WHIC H WARRANTED INTERFERENCE BY THE TRIBUNAL, MORE SO FOR SETTING A SIDE THE ORDER OF THE COMMISSIONER AND FOR ENSURING THAT THE ORDER PA SSED BY THE ASSESSING AUTHORITY WAS LEFT IN TACT. 26. WE ARE ALSO NOT IN A POSITION TO ACCEPT THE SUB MISSION THAT, THE MATERIALS HAD BEEN PLACED BEFORE THE ASSESSING AUTHORITY AND THEREFORE THERE SHOULD BE A CONCLUSION THAT THE AUT HORITY HAS APPLIED HIS MIND TO THE SAME AND THERE WAS NO QUEST ION OF THE COMMISSIONER INTERFERING BY TAKING A DIFFERENT VIEW ETC. 15. WHEN THE AO HAS NOT EXAMINED THE IMPUGNED ISSU E AND DID NOT RECORD A FINDING IN HIS ORDER, HIS ORDER CLEARLY F ALLS WITHIN THE SCOPE OF SECTION 263 OF THE ACT. IN PURSUANCE OF SECTION 263 , WHEN THE PR. CIT PASSED AN ORDER HOLDING THAT THE ASSESSEE CAN DE MONSTRATE BEFORE THE A O THAT THE SAID TRANSACTION MENTIONED IN THE SHOW CAUSE NOTICE DID NOT PERTAIN TO THEM BY PRODUCING NECESSARY EVID ENCES AND MATERIALS AS EXPLAINED IN THEIR SUBMISSION. THE AO SHOULD DULY CONSIDER SUCH EVIDENCE AND MAKE NECESSARY ENQUIRIES AND COMPLETE THE ASSESSMENT IN ACCORDANCE WITH LAW BY GIVING REA SONABLE AND SUFFICIENT OPPORTUNITY TO THE ASSESSE BEFORE COMPLE TING THE ASSESSMENT, SUCH AN ORDER COULD NOT HAVE BEEN CONTENDED AS DE TRIMENTAL TO THE INTEREST OF THE ASSESSEE, AS IT WAS ALWAYS OPEN TO THE ASSE SSEE TO JUSTIFY ITS CLAIM AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT, S UPRA. IN VIEW OF THAT WE DO NOT FIND ANY MERIT IN THE ASSESSEES GROUNDS OF APPEAL AND HENCE ITA.847 & 848/BANG/2015 PAGE - 18 THEY ARE DISMISSED. 16. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH DECEMBER, 2016. SD/- SD/- (VIJAY PAL RAO) (S. JAYARAMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR