DCIT, Bangalore V. M/s Mysore Minerals Ltd., Bangalore

ITA 971/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63828 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 31-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 143(3); 234B; 145; 28

Judgement Text

PAGE 1 OF 12 ITA NOS.955 & 971/B ANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.955/BANG/2011 (ASSESSMENT YEAR 2007-08) M/S MYSORE MINERALS LTD., NO.39, M G ROAD, BANGALORE-1. PA NO.AACCM 2873 L VS THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-12, BANGALORE-1. (APPELLANT) (RESPONDENT) ITA NO.971/BANG/2011 (BY REVENUE) DATE OF HEARING : 06.12.2012 DATE OF PRONOUNCEMENT : 18.12.2012 ASSESSEE BY : SHRI H N KHINCHA, C.A. REVENUE BY : SHRI S K AMBASTHA, CIT (DR-I) , ITAT ORD ER PER GEORGE GEORGE K : ITA NO.955/2011 PREFERRED BY THE ASSESSEE AND ITA NO.971/2011 AT THE INSTANCE OF THE DEPARTMENT ARE D IRECTED AGAINST THE ORDER OF THE LEARNED CIT (A)-III, BANGALORE DATED 3 0.08.2011. THE RELEVANT ASSESSMENT YEAR IS 2007-08 . 2. THESE APPEALS ARE PERTAINING TO THE SAME ASSESS EE AND ARISING OUT OF THE CIT(A)S ORDER DATED 30/08/2011 AND HENC E, THEY WERE HEARD TOGETHER AND DISPOSED OFF BY THIS CONSOLIDATED ORDER . PAGE 2 OF 12 ITA NOS.955 & 971/B ANG/2011 2 ITA NO.955/BANG/2011 (ASSESSEES APPEAL) 3. THE ASSESSEE HAS RAISED FOUR ISSUES, NAMELY: (I) ADDITION OF RS.5,72,03,933/- BE DELETED. (II) ADDITION TO CLOSING STOCK FOR ASSESSMENT YEAR 2006- 07 AMOUNTING TO RS.1,17,71,039/- BE TREATED AS PART OF OPENING STOCK FOR ASSESSMENT YEAR 2007-08. (III) REVISED RETURN FILED BE ACCEPTED AND DEDUCTIONS CLAIMED THEREIN BE ALLOWED IN ENTIRETY. (IV) INTEREST LEVIED UNDER SECTION 234A, 234B AND 234C BE DELETED. (I) ADDITION OF RS.5,72,03,933/- AS PREMIUM SHORT ACCOU NTED (GROUND NO.1.1) NO ARGUMENTS WERE RAISED BY BOTH THE PARTIES IN TH E COURSE OF HEARING ON THIS ISSUE. MOREOVER, WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS CLEARLY DIRECTED THE ASSESSING OFFICER TO CHECK THE RETURN OF INCOME FOR THE SUBSEQUENT YEAR AND IF IT IS FOUND THAT THE ADDITION MADE IN THE CURRENT YEAR IS OFFERED TO TAX IN THE SUBSEQUENT YEAR , THEN SUCH INCLUSION IN THE INCOME IN THE SUBSEQUENT YEAR IS TO BE DELETED. IN VIEW OF THE ABOVE DIRECTION OF THE CIT(A), THIS ISSUE RAISED BY THE AS SESSEE COMPANY IS DISMISSED. (II) ADDITION MADE TO CLOSING STOCK FOR ASSESSMENT YEAR 2006-07 AMOUNTING TO RS.1,17,71,039/- BE TREATED AS PART OF OPENING STOCK FOR ASSESSMENT YEAR 2007-08 (GROUND NO.2.1) 1. THE ASSESSEE RAISED ADDITIONAL GROUNDS BEFORE T HE FIRST APPELLATE AUTHORITY WHICH READS AS FOLLOWS:- PAGE 3 OF 12 ITA NOS.955 & 971/B ANG/2011 3 THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT CONSIDERING A SUM OF RS.1,17,71,039/- AS FORMING PA RT OF OPENING STOCK AS ON 01.04.2006. ON FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE, ADDIT ION OF RS.1,17,71,039/- HAVING BEEN CONFIRMED IN RESPECT O F CLOSING STOCK AS ON 31.3.2006, THE IMPUGNED SUM OF RS.1,17,71,039/- SHOULD FORM PART OF OPENING STOCK AS ON 01.04.2006. 1.1 THE SUBMISSION OF THE ASSESSEE WITH REFERENCE TO THE ABOVE GROUND BEFORE THE FIRST APPELLATE AUTHORITY IS AS U NDER:- 13.0 (1) CLOSING STOCK OF MINERALS AS ON 31.03.2006 WAS QUANTIFIED BY THE APPELLANT THROUGH PHYSICAL VERIFICATION. ON PHYSICAL VERIFICATION, THE ACTUAL QUANTITY OF MINERALS WAS LESS THAN THE QUANTITY AS PE R THE DOCUMENTS OF THE APPELLANT. IN OTHER WORDS, THERE WERE SHORTAGES IN THE QUANTITY OF MINERALS. THE APPELLAN T EXCLUDED THE SHORTAGE OF MINERALS FOUND ON PHYSICAL VERIFICATION IN THE PROCESS OF VALUATION OF CLOSING STOCK AS ON 31.3.2006. IN OTHER WORDS, THE SHORTAGE OF MINE RALS FOUND ON PHYSICAL VERIFICATION DID NOT FORM PART OF CLOSING STOCK AS ON 31.3.2006. (2) IN THE ORDER PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2006-07, THE LEARNED ASSESSI NG OFFICER MADE ADDITION OF RS.1,17,71,039/- TO THE VA LUE OF CLOSING STOCK AS ON 31.3.2006. THE ADDITION WAS IN RESPECT OF VALUE OF MINERALS FOUND SHORT ON PHYSICAL VERIFICATION. APPEAL WAS FILED AGAINST THE ORDER O F THE LEARNED ASSESSING OFFICER BEFORE THE LEARNED CIT(A) . THE LEARNED CIT(A)-III VIDE ORDER DATED 17.2.2010 CONFIRMED THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER. THE APPELLATE ORDER HAS ALREADY BEEN FILED BEFORE YOUR HONOUR. WHEN ADDITION ON ACCOUNT OF SHORTAGE OF MINERALS AMOUNTING TO RS.1,17,71,039/- FORMS PART OF CLOSING STOCK AS ON 31.3.2006 THE SAID AMOU NT PAGE 4 OF 12 ITA NOS.955 & 971/B ANG/2011 4 WOULD ALSO FORM PART OF OPENING STOCK AS ON 1.4.200 6. THUS, FOR ASSESSMENT YEAR 2007-08, THE SUM OF RS.1,17,71,039/- SHOULD BE CONSIDERED AS FORMING PA RT OF OPENING STOCK AS ON 1.4.2006. WHEN THE SUM OF RS.1,17,71,039/- IS CONSIDERED AS FORMING PART OF O PENING STOCK AS ON 1.4.2006, THE INCOME ASSESSED BY THE LEA RNED ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION W OULD BE REDUCED TO THE EXTENT OF RS.1,17,71,039/-. 1.2 THE CIT(A) AFTER REPRODUCING THE TRIBUNALS OR DER, WHICH UPHELD THE ADDITION MADE ON CLOSING STOCK FOR THE A SSESSMENT YEAR 2006-07, REJECTED THE ADDITIONAL GROUND RAISED BY THE ASSESSE E COMPANY. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 24.0 IN VIEW OF THE FINDINGS IN RESPECT OF EXCESSIVE SHORTAGE CLAIMED IN THE STOCK, THE ABOVE DISALLOWANCE WAS SUSTAINED. FOR THE REASONS GIVEN FOR SUSTAINING THE DISALLOWANCE AS ABOVE, DOES NOT WARR ANT ACCOUNTING FOR SUCH SHORTAGE OF CLOSING STOCK AS OP ENING STOCK FOR THE ASSESSMENT YEAR 2007-08. THE APPELLAN T COMPANY ITSELF CLAIMED THAT THERE WAS SHORTAGE OF ST OCK WHICH WILL NOT AFFECT THE VALUE OF STOCK SINCE THE APPELLANT COULD NOT EXPLAIN THE SHORTAGE OF MINERAL S, THE SAME WAS BROUGHT TO TAX FOR THE EARLIER YEAR I.E. AY 2006-07. HENCE, THE ADDITIONAL GROUND RAISED BY THE APPELLANT ON THIS ACCOUNT IS TREATED AS DISMISSED. 1.3 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 1.4 THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 1.5 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE FINDING OF THE CIT(A). PAGE 5 OF 12 ITA NOS.955 & 971/B ANG/2011 5 1.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. AS RIGHTLY POINTED OUT BY THE CIT(A), FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE COMPANY ITSELF ADMITTED THAT T HERE WAS SHORTAGE OF STOCK WHICH RESULTED IN ADDITION AS CLOSING STOCK A ND THE SAME WAS BROUGHT TO TAX FOR THE EARLIER ASSESSMENT YEAR I.E. 2006-07. THIS ADDITION IN THE PREVIOUS ASSESSMENT YEAR ON ACCOUNT OF SHORTAGE OF S TOCK WILL NOT AFFECT THE VALUATION OF STOCK WHICH WARRANTS AN ADDITION TO TH E OPENING STOCK FOR THE CONCERNED ASSESSMENT YEAR. THEREFORE, GROUND NO.2.1 RAISED BY THE ASSESSEE IS DISMISSED. (III) REVISED RETURN FILED BE ACCEPTED AND DEDUCTIO N CLAIMED THEREIN TO BE ALLOWED (GROUND NO.3.1) 2. THE ASSESSEE COMPANY FILED A REVISED RETURN ON 1 4/12/2009. IN THE REVISED RETURN, THE ASSESSEE CLAIMED DEDUCTION OF RS.98,03,505/- ON ACCOUNT OF ARREARS OF SALARY & WAGES AND RENT. THE ASSESSING OFFICER HELD THAT THE REVISED RETURN IS INVALID SINCE IT WAS FIL ED AFTER ONE YEAR FROM THE END OF THE ASSESSMENT YEAR. THE ASSESSING OFFICER A LSO NOTED THAT THE ORIGINAL RETURN WAS FILED BELATEDLY AND HENCE, THE R EVISED RETURN CANNOT BE FILED. THEREFORE, THE ASSESSING OFFICER DECLINED T O TAKE COGNIZANCE OF THE REVISED RETURN. 2.1 ON FURTHER APPEAL, THE CIT(A) DISMISSED THE PL EA OF THE ASSESSEE BY OBSERVING THUS:- 25.0 WITH REGARD TO GROUNDS RELATING TO DEDUCTION CLAIMED IN THE REVISED RETURN BE ALLOWED, THE SAME IS NOT TENABLE AS THE REVISED RETURN IS INVALI D AS IT WAS FILED AFTER ONE YEAR FROM THE END OF THE RELEVAN T PAGE 6 OF 12 ITA NOS.955 & 971/B ANG/2011 6 ASSESSMENT YEAR AS HAS BEEN HELD BY THE ASSESSING OFFICER IN PARA-4 OF THE IMPUGNED ORDER. THE SAME IS IN ACCORDANCE WITH LAW AND HENCE, THE GROUND RAISED BY THE APPELLANT IS DISMISSED. 2.2 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 2.3 IT WAS CONTENDED THAT A FRESH CLAIM OF DEDUCTI ON CAN BE MADE BEFORE THE FIRST APPELLATE AUTHORITY AND THE APPELLA TE AUTHORITY IS DUTY BOUND TO ENTERTAIN THE SAME, THOUGH THE CLAIM OF DE DUCTION WAS NOT MADE IN THE RETURN OF INCOME. FOR THE ABOVE PROPOSITION, T HE LEARNED AR RELIED ON THE RECENT JUDGMENT OF THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT V PRUTHVI BROKERS AND SHAREHOLDERS P. LTD. REPORTED I N (2012) 349 ITR 336 (BOM.). 2.3 THE LEARNED DR PRESENT WAS DULY HEARD. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD. THE ASSESSEE IS ENTITLED TO RAISE A NEW ISSUE THAT IS NOT CLAIMED IN THE RETURN OF INCOME AND THE APPELLATE AUTHORITY HAS POWER TO CONSIDER THE CLAIM NOT MADE IN THE RETURN OF INCOME. FOR TH IS PROPOSITION WE ARE FORTIFIED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V PRUTHVI BROKERS AND SHAREHOLDERS P. LTD. REPO RTED IN (2012) 349 ITR 336 (BOM.). HENCE, THIS ISSUE IS RESTORED TO THE F ILE OF THE CIT(A) TO CONSIDER THE CLAIM OF DEDUCTION ON MERITS. IT IS O RDERED ACCORDINGLY. IN THE RESULT, GROUND NO.3.1 IS ALLOWED FOR STATISTICAL PU RPOSES. PAGE 7 OF 12 ITA NOS.955 & 971/B ANG/2011 7 (IV) LEVY OF INTEREST UNDER SECTION 234A, 234B AND 2 34C OF THE ACT (GROUND NO.4.1) THE LEVY OF INTEREST IS MANDATORY AND CONSEQUENTIAL AND, HENCE, THE ABOVE GROUND IS DISMISSED. 3. GROUND NO.5.1 IS GENERAL IN NATURE AND NO SPECI AL ADJUDICATION IS CALLED FOR AND HENCE, THIS GROUND IS DISMISSED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.971/BANG/2011 (REVENUES APPEAL) 5. THE EFFECTIVE GROUND RAISED BY THE DEPARTMENT RE ADS AS FOLLOWS:- THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F RS.47,97,19,585/- AND RS.2,26,03,642/- ON ACCOUNT O F DIFFERENCE BETWEEN SALES RECORDED IN THE BOOKS AND SALES REVENUE THAT ACCRUED TO THE ASSESSEE ON THE BASIS O F RATES AS PER THE TERMS OF MARKETING AGREEMENT WITH M/S KALYANI STEELS, M/S MUKUND STEELS AND SHIVASHANKAR GRANITES LTD. THE CIT(A) DID NOT APPRECIATE THAT T HE ASSESSEE HAS NO JUSTIFICATION FOR RAISING THE INVOI CES AT A RATE LOWER THAN THE DESIRED RATE CAUSING LOSS TO PU BLIC EXCHEQUER WHICH HAS BEEN INVESTIGATED AND REPORTED BY KARNATAKA LOKAYUKTA. THE CIT(A) ALSO DID NOT APPREC IATE THAT THE ASSESSEE HAS BEEN FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THAT IT RAISED DEBIT NOTES FOR THE ABOVE SAID AMOUNTS WHICH AMOUNTS TO RECOGNITION OF INCOME BUT CANCELLED THOSE DEBIT NOTES WITHOUT ANY SATISFACTORY EXPLANATION. PAGE 8 OF 12 ITA NOS.955 & 971/B ANG/2011 8 5.1 THE ASSESSING OFFICER MADE AN ADDITION OF RS.4 7,97,19,585/- AND RS.2,26,03,642/- AS SUPPRESSED PROFIT ON SALE O F C-ORES (CALIBRATED ORES-IRON ORE LUMPS) BELOW THE MARKET PRICE TO KALY ANI STEELS AND SHIVASHANKAR GRANITES. 5.2 ON FURTHER APPEAL, THE CIT(A) ALLOWED THE APPE AL OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS:- 19.0 I HAVE GONE THROUGH THE OBSERVATIONS MADE BY THE ASSESSING OFFICER FOR MAKING ADDITION TO RETU RNED INCOME BY WAY OF SALES TO KALYANI STEELS BELOW MARKET PRICE. I AGREE WITH THE ASSESSING OFFICER THAT THE PRICE CHARGED FOR C-ORE IS MUCH BELOW THE MARKET RATE. TH E APPELLANT HAS SOLD C-ORE TO THE PARTIES MUCH BELOW THE MARKET PRICE. I HAVE ALSO GONE THROUGH SUBMISSIONS MADE BY THE APPELLANT. FROM THE SUBMISSIONS MADE BY THE APPELLANT, IT IS INFERRED THAT SALE OF ORES TO THE KALYANI STEELS AND ASSOCIATES AT RS.314/- PMT AND IS SUPPOR TED BY INVOICES RAISED, ENTRIES IN THE BOOKS AND FURTHER REALIZATION OF BILL BOOKS OF ACCOUNTS ARE AUDITED B Y CHARTERED ACCOUNTANTS. APPELLANT IS A GOVERNMENT O F KARNATAKA UNDERTAKING. THE SYSTEM OF ACCOUNTING FOLLOWED BY THE APPELLANT COMPANY IS MERCANTILE SYSTEM AND IS AS PER PROVISIONS OF SEC.145. WHAT APPELLAN T HAS REALIZED IS AS PER BILLS RAISED. NEITHER DURING AS SESSMENT NOR AS PER RECORDS PRODUCED DURING THE ASSESSMENT, THERE WERE ANY INDICATION REGARDING REALIZATIONS BEYO ND WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. PROFIT FROM BUSINESS AND PROFESSION ARE TO BE COMPUTED UNDER SECTION 28 OF THE ACT, AS PER THE ACCOUNTING POLICI ES FOLLOWED BY THE COMPANY IS CONSISTENT WITH SEC.145 OF THE ACT. THE SCOPE OF TOTAL INCOME IS ALSO DEFINED UNDER SECTION 5 OF THE ACT. ONLY THE REAL INCOME IS TAX ABLE UNDER THE PROVISIONS OF THE ACT. WHAT IS TO BE TAX ED IS ONLY REAL INCOME AND NOT THE HYPOTHETICAL INCOME. IN COME PAGE 9 OF 12 ITA NOS.955 & 971/B ANG/2011 9 TAX DOES NOT PERMIT AN ASSESSING OFFICER TO IMPUTE INCOME OF AN ASSESSEE WITHOUT ANY EVIDENCE. FURTHER , AFTER TAKING INTO CONSIDERATION OF ALL FACTS AND CIRCUMSTANCES EVEN IF THE ALLEGED MALPRACTICE IN REALIZATION OF SALES LESS THAN MARKET PRICE IS PROV ED TO BE TRUE, THE APPELLANT COMPANY IN NO WAY HAS RECEIVED TH E REALIZATION FROM SALE OF C-ORES IN EXCESS OF WHAT I S RECORDED IN THE BOOKS OF ACCOUNTS. IN VIEW OF THES E FACTS, IN MY VIEW, THE ADDITION MADE ON ACCOUNT OF SALES TO THE PARTIES BELOW MARKET RATE AFTER DEDUCTING ASSUMED ENHANCED COST OF EXTRACTION AMOUNTING TO RS.47,79,19,585/- IS NOT PROPER AND NOT IN ACCORDANCE WITH LAW. THEREFORE, IN VIEW OF THESE FACTS, THE ADDITION MADE TO TOTAL INCOME OF RS.47,79,19,585/- IS DELETED. SIMILARLY, ADDITION OF RS.2,26,03,642/- MADE IN RESPECT OF SHIVASHANKAR GRANITES IS ALSO DELETED. 5.3 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US . 5.4 AT THE VERY OUTSET, THE LEARNED AR SUBMITTED TH AT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE CONSOLIDATED ORD ER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.679, 680 & 733/BANG/ 2010 AND 350, 351/BANG/2011 VIDE ORDER DATED 2/11/2012. 5.5 THE LEARNED DR WAS UNABLE TO CONTROVERT THE SU BMISSION MADE BY THE LEARNED AR. 5.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. THE TRIBUNAL IN ASSESSEES OWN CASE (CI TED SUPRA) HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE AND HELD THAT THE ADDITION IS NOT WARRANTED. THE RELEVANT FINDING OF THE TRIBUNAL RE ADS AS FOLLOWS:- PAGE 10 OF 12 ITA NOS.955 & 971/ BANG/2011 10 18.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED AND CONSIDERED THE MATERIAL ON RECORD. WE FIND FRO M THE RECORD THAT THE ASSESSEE HAS FURNISHED ALL THE DETA ILS REQUIRED BY THE ASSESSING OFFICER. FROM THE DETAILS ON RECORD IN RESPECT OF THE ADDITIONS MADE TO THE RETU RNED INCOME ON ACCOUNT OF SALES TO M/S. KALYANI STEELS L TD BELOW MARKET PRICE, WE AGREE WITH THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE PRICE CHARGED FOR C- ORE IS BELOW THE MARKET PRICE. WE ALSO OBSERVE THAT TH E 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 AS SESSEE COMPANY. FROM THE SUBMISSIONS MADE BY THE ASSESSEE, A GOVERNMENT OF KARNATAKA UNDERTAKING, IT CAN BE INFE RRED THAT THE SALES OF C-ORE TO KALYANI STEELS LTD ARE SUPPORTED BY INVOICES RAISED, ENTRIES IN THE BOOKS O F ACCOUNTS AUDITED BY CHARTERED ACCOUNTANTS. THE SYST EM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS THE MERCAN TILE SYSTEM AS PER THE PROVISION OF SECTION 145 OF THE AC T AND WE FIND THAT NO FAULT HAS BEEN FOUND THEREIN NO R HAS IT BEEN REJECTED. NOWHERE IN THE ORDER OF ASSESSME NT OR THE MATERIAL ON RECORD DO WE FIND ANYTHING TO ESTABL ISH THAT THERE WERE ANY REALIZATION ON ACCOUNT OF SALES BEYOND WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. AS PER THE I.T. ACT, 1961 PROFITS FROM BUSINESS ARE TO BE COMPUTED UNDER SECTION 28 OF THE ACT AS PER THE ACCOUNTING POLICIES MANDATED BY SECTION 145 OF THE A CT WHICH IN THE ASSESSEE'S CASE IS THE MERCANTILE SYSTE M. THE SCOPE OF TOTAL INCOME IS ALSO DEFINED UNDER SEC TION 5 OF THE ACT. THE I.T. ACT, 1961 IS VERY CLEAR THAT W HAT IS TO BE TAXED IS THE REAL INCOME OF AN ASSESSEE AND N OT NOTIONAL OR HYPOTHETICAL INCOME AND IT DOES NOT PERM IT AN ASSESSING OFFICER TO COMPUTE INCOME WITHOUT ANY EVIDENCE. THERE IS NO FINDING BY THE ASSESSING OFFI CER 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 PAGE 11 OF 12 ITA NOS.955 & 971/ BANG/2011 11 IT HAD NOT RECORDED IN ITS BOOKS. THE ASSESSEE IS LEGALLY BOUND TO ABIDE WITH THE TERMS OF THE CONTRACTUAL OBLIGATIONS ARISING OUT OF ITS AGREEMENT TO SELL C- ORE TO M/S. KALYANI STEELS LTD AND THE CONTRACT ENTERED INT O 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 THAT NO EVIDENCE WHATSO EVER HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO ESTABLISH THAT THE ASSESSEE HAS REALIZED FROM THE S ALE OF C-ORE TO M/S. KALYANI STEELS LTD MORE THAN WHAT IS RECORDED IN THE ASSESSEE'S BOOKS OF ACCOUNT. IN TH IS VIEW OF THE MATTER, THE ADDITION MADE ON ACCOUNT OF SALES TO M/S. KALYANI STEELS LTD BELOW MARKET RATE, IN OU R CONSIDERED OPINION IS NOT FOUNDED ON SOUND AND ACCE PTED ACCOUNTING AND LEGAL PRINCIPLES AND IS THEREFORE LI ABLE TO BE DELETED. WE, THEREFORE, FIND NO REASON TO INTER FERE WITH THE DECISION OF THE LEARNED CIT(APPEALS) IN DE LETING THE ADDITION OF RS.15,51,45,117. THE GROUNDS AT S. NOS.2 AND 3 RAISED BY REVENUE ARE ACCORDINGLY DISMISSED. 5.7 IN VIEW OF THE ORDER OF THE COORDINATE BENCH O F THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA), WE HOLD THAT THE CIT(A ) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.47,97,19,585/- AND RS.2,26,03,642/-. 6. IN THE RESULT, THE DEPARTMENTS APPEAL IS DISMI SSED. THE ORDER PRONOUNCED ON THE 18 TH DAY OF DECEMBER, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER PAGE 12 OF 12 ITA NOS.955 & 971/ BANG/2011 12 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BAN GALORE.