TaxTMI 
TaxTMI 
2014 (7) TMI 993
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....ws papers followed by the report of Lokayukta of Karnataka received/obtained by the A.O. and also enquiries made in this regard from the Director's of the Company, assessment was reopened under section 147 of the Act by issuing notice under section 148 and reassessment was completed for A.Y. 2007-08 determining the total income at Rs. 4042,93,38,564/- by making the following additions. a) Suppression of sale value of exports Rs. 506,10,92,507 b) Disallowance u/s.40(a)(ia) Rs. 20,56,93,044 c) Disallowance u/s.40(a) Rs. 19,83,98,000 d) Disallowance of additional depreciation wrongly claimed Rs. 7,46,73,168 e) Disallowance of claim of expenses of earlier year Rs. 22,62,104 f) Loss on sale of assets Rs. 48,335 4. For A.Y. 2010-2011 assessee filed return of income on 24.09.2010 admitting total income at Rs. 5114,44,66,450/- and the assessment was completed under section 143(3) determining total income at Rs. 5522,12,83,862/- inter alia, making various additions. 5. Assessee contested before the Ld. CIT(A) amongst various additions made, the issue of reopening of assessment under section 147 of the Act in AT 2007-08. While upholding the reopening for A.Y. 2007-08, t....
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.... value. Even the Hon'ble High Court of Andhra Pradesh, in a recent judgment on a Writ Petition filed by the Hon'ble Minister in a disproportionate assets case, held that there is prima facie evidence in the contents of the petition and ordered for CBI enquiry against a Member of Parliament. Similarly, the reopening of the assessment in the present case basing on the reports of the Newspaper and report of Hon'ble Lokayukta of Karnataka is not bad in law and is correctly justified. As a matter of fact, the scrutiny assessment proceedings in the appellant's case for assessment year 2009-10 have also concluded on 30-12-2011 i.e., prior to completion of the reassessment proceedings, which led to the conclusion that the assessee is resorting to suppression of value of sales towards export of Iron Ore. As such, the fresh set of fact of resorting to suppression of value of sales emerged during the regular assessment for assessment year 2009-10, which has been in the knowledge of the appellant. Hence, the reopening of assessment for assessment year 2007- 08 is not bad in law and is justified. 4.4 So far as sequence of events leading to the reassessment is....
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.... vi) ITO vs. Shiv Shakti Build Home (P) Ltd. (2011) 141 TTJ 123 (ITAT Jodhpur) vii) CIT vs. S.F.I.L. Stock Broking Ltd. (2010) 41 DTR 98 (Del.) viii) VXL Technologies Ltd. vs. ACIT ITA.No.2728/Del/2013 11. After considering the various case law, on the facts of the case we agree with the findings of the Ld. CIT(A). Before reopening the assessment, A.O. has in fact got the reports from the news papers and then A.O. also mentioned in the assessment order the steps taken for obtaining the information from Lokayukta, various enquiries caused including statements recorded from the Officers involved in export of iron ore before reopening assessment. As already pointed out by the Ld. CIT(A), proceedings for A.Y. 2009-10 were also pending at that point of time. Therefore, we are of the opinion that A.O. has prima facie belief to reopen the assessment under section 147. At the stage of reopening the assessment, it is not necessary to examine the quantum of escapement. What is required to be verified is whether there is any belief for coming to a decision whether income has escaped assessment. On the basis of the information availabl....
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....y year during the pendency of the long term contract. As far as the price is concerned, there is a specific provision in the long term agreement that prices shall be negotiated mutually each year for supply during the year. With regard to fixation of price, short term agreements, yearly and quarterly are made. The basis for fixation of the price is stated to be the "bench mark price". The 'bench mark price' is stated to be based on the negotiations held between the main importing and exporting countries and this is in the form of percentage increase/decrease over the previous year's price. Further, it is learnt from the statements given by the above officers that NMDC has not adhered to or taken into account the market price for fixation of export price. On further investigations revealed that there is difference between export sales stated by MMTC and sales declared by NMDC. There is huge difference between the sale rate of NMDC and the sale rate of other exporters during the financial year 2006-07 to financial year 2009-10. Thus, he opined that NMDC was declaring export sales at a very low rate when the market rates/ the rates at which the other exporters exported iro....
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....e true and fair by the Government and statutory auditors. Accordingly, the assessee requested to reject the contentions of the Assessing Officer that there is under invoicing of exports. 13. Assessee inter alia made various submissions which can be summarized as under : "Firstly, the appellant has not directly exported the iron ore. It has sold the iron ore to MMTC (another Govt. of India PSU) and MMTC has exported the iron ore to Japan, Korea, China etc. 1. It is squarely covered by case-law : The above issue regarding under invoicing of sales are squarely covered in the case of Mysore Minerals Ltd for four A.Ys 2004-05 to 2007-08, vide ITA No.350,351/Bang/2011 and ITA No.679 & 680 and 733/Bang/2010 for A. Y.2004-05, 2005-06, 2006-07 and ITA No.971/Bang/2011 for AY 2007-08. 2. Real income is taxable but not hypothetical income »> Lokayukta stated that, "the list of exporters and their preferred consignee" In the list of exporters, who have under-invoiced exports, there is no name of NMDC &nbs....
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....as under : "5.5.6 In the light of the observations in the preceding paras, it can be concluded that there are inconsistencies in the pricing policy of the appellant with Japan and South Korea and the appellant could not give concrete explanation rather substantiate with proper evidence to the figures reported in the report of Dr U.V.Singh. As such, the appellant failed to bring out a case that the figures in the report of Dr U.v.Singh are incorrect except stating that the report is wrong. Hence, the addition made by the Assessing Officer on this count is upheld and the grounds raised by the appellant are dismissed". 15. Ld. Counsel reiterated the submissions made before the authorities. His main contentions are that (1) there are factual errors in the report as assessee is not a direct exporter but routed the exports only through MMTC (2) that assessee was always exporting by way of long term contracts negotiated through MMTC, representatives of the foreign companies and as approved by the Ministry of Steel and also Cabinet notes. (3) that Lokayukta did not quantify any concealment of income but only expressed opinion based on the spot price for China that MMTC....
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....,253,4936 that has not been taken into consideration while computing sales value of export as declared by NMDC in column 3 as per page 90 of appeal paper. (page 36 of assessment order) d) Total sales value of export as per International market is Rs. 9,756,657,544 whereas in the assessment order (at page 81 of appeal paper & 27 of assessment order) it is valued at Rs. 12,201,629,446. The A.O. can only give the explanation how he arrived at this figure. e) Total sales value of export as declared by NMDC is valued at Rs. 4,695,565,037 by the A.O. whereas the actual export sales value of NMDC is Rs. 7,264,000,000. 6. Taking into consideration, the above facts, the export sales made by MMTC works out to Rs. 734,61,80,143 We would like to bring to your notice that in table F.Y. 2006-07 (A.Y. 07-08) - Iron ore sized Lump at page 90 of appeal paper (page 36 of assessment order), in S.No.1, Quantity of export has been taken at 1398150 instead of 13981.50 (as reflected in Annexure-B in S.No.15) inflating the suppression of sales value by - 3,648,359,911." 18. As can be seen from the above as against the export ....
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....he parties. These cannot be brushed aside. 20. More over, similar issue was considered by the Coordinate Bench in the case of Mysore Minerals Ltd. vs. ACIT ITA.No.351/Bang./2011 for A.Y. 2005-06. On similar additions made by A.O. therein, the Hon'ble ITAT vide its order dated 2nd November, 2012 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 furnished all the details required by the Assessing Officer. From the details on record in respect of the additions made to the returned income on account of sales to M/s. Kalyani Steels Ltd 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 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 au....
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....ove case as the facts in that case are that assessee entered into agreement with a private company whereas this assessee has entered into long term contract with foreign buyers which were duly negotiated and finally approved by Government of India. We, therefore, find no reason to confirm the addition of the above amount, as the assessee company had furnished all the details required by the A.O. and assessee has accounted for all the amounts it received. There is no iota of information that assessee or any agent received any amount over and above the amounts accounted in the books of accounts. Moreover, I.T. Act does not permit making additions on hypothetical income particularly, as suppression of sales when there is no evidence at all. Additions cannot be made on presumptions and hypothesis. In view of this, we have no hesitation in deleting the addition of the above amount. Ground No.3 raised by the assessee is accordingly allowed. 22. Ground No.4 pertains to disallowance of additional depreciation claimed by the assessee on machinery. A.O. disallowed the additional depreciation in the re-assessment proceedings which was originally allowed in the scrutiny proceedings, holding t....
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....1792/Hyd/2013 - A.Y. 2007-08 (Revenue Appeal) : 25. This is Revenue appeal for the same A.Y. 2007-08. The Revenue has raised the following three grounds which are material for deciding appeal : "2. The CIT(A) ought to have appreciated the fact that the disallowance u/s.40(a)(ia) for non-deduction of tax on commission paid to M/s. MMTC @ 2.8% is as per law. 3. The CIT(A) ought to have appreciated the fact that the disallowance u/s.40(a) which are mentioned in Col.No.17(1) of Form No. 3CD are as per law. 4. The CIT(A) erred in accepting the assessee's claim of prior period expenses which is not acceptable one as per law." 26. Ground No.2 pertains to the issue of disallowance under section 40(a)(ia) for non-deduction of tax and commission paid to MMTC at Rs. 2.8%. The A.O. made the addition on the reason that MMTC is acting as canalizing agent to NMDC in export of iron ore and NMDC is making payment of commission of 2.8% of FOB price. On the reason that the assessee failed to deduct tax at source on the above payment, A.O. disallowed the amount under section 40(a)(ia). It was the submission of the assessee that assessee is ....
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....uctuous." 28. It was further submitted that miscellaneous application filed by the department against the above orders were also dismissed by the ITAT. Following the decision of the ITAT, the Ld. CIT(A) deleted the addition. Hence, Revenue is aggrieved. 29. On considering the rival contentions, we do not see any reason to interfere with the order of the CIT(A). Respectfully following the afore cited decisions in assessee's own case, we hold that since the assessee is not entitled to export directly and export by the MMTC was on principalprincipal basis, there can be no commission payment to MMTC, as such the question of sustaining the order of the Assessing Officer in estimating the commission and disallowing the same under S.40(a)(ia) does not arise. In fact there is no claim of commission by assessee. So question of deduction of tax does not arise and consequently disallowance u/s 40(a)(ia). Accordingly, the order of the CIT(A) is upheld. Accordingly, ground No.2 of the Revenue is dismissed. 30. Ground No.3 pertains to the disallowance under section 40(a) stated to be following Column 17(f) of Form 3CD of Rs. 19.84 crores. A.O. made the addition on the reason that Form 3CD has....
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....the Revenue is rejected. 33. In the result, ITA.No.1792/Hyd/2013 of the Revenue is dismissed. ITA.No.1795/Hyd/2013 - A.Y. 2010-2011 (Assessee appeal) 34. This is assessee's appeal for the A.Y. 2010-2011. The assessee has raised 7 grounds in this appeal, Ground No.1 and 7 are general in nature and therefore, does not require any adjudication. 35. Ground No.2 pertains to the issue of suppression of sales added by the A.O. and confirmed by the CIT(A) at Rs. 255.03 crores. As stated in A.Y. 2007-08, based on the news paper reports of the Lokayukta, A.O. made enquiries and then made the addition of so-called suppression of sales. The arguments of the assessee are similar in this A.Y. also. As noticed by us in A.Y. 2007-08, this year also there are variations in the amounts adopted by the A.O. As per the report of Dr. U.V. Singh which was the basis for making the suppression of sales, the export sales admitted by NMDC are at Rs. 1116.00 crores and total export sales as per the international market was arrived at Rs. 1289.14 crores thereby, suppression of sales determined at Rs. 173.13 crores. This statement was acknowledged at page 14 of the assessment order. However, A.O. while comp....
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.... "22. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. Similar came up for consideration before the coordinate bench of ITAT, Cuttack in case East India Minerals Ltd. Vs. JCIT in ITA No. 224/CTK/2012, vide its order dated 25/06/2012, on which reliance placed by the assessee, wherein it has been held as follows: "7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we uphold the contention of the learned Counsel for the assessee for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and the applicability thereof. Explanation to Section 32(1)(ii) leans in favour of the assessee to the extent that it is the actual action of put to use which entitles the assessee to claim depreciation. A straight line method of claiming the writing off of lease hold rights for the period of lease cannot be denied to the assessee for the simple reason it being intangible asset has been written off which pertains to land being....
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....y expenditure required for drawing up of effective deed of lease namely, the expenditure in respect of stamp duty, registration charges and professional fees paid to the solicitors, who prepared and got registered the deed of lease. Further there was no element of premium in the amount claimed as expenditure and the expenditure would have been the same even if the lease had been of a shorter duration provided the period of lease was more than one year. Hence, the period of the lease could not be regarded as decisive of the circumstances as to whether the asset or advantage secured is of an enduring nature. Hence the expenditure on registration fee, solicitors fee and stamp duty incurred for registering lease deed was a revenue expenditure allowable under s. 37(1). 28.1 The Hon'ble Court concluded that expenditure on registration fee, solicitor's fee and stamp duty incurred in connection with registration of lease deed is revenue expenditure irrespective of period of lease. 28.2 The coordinate bench of ITAT, Cuttack in case of Shri Jitendra Nath Patnaik Vs. DCIT in ITA No. 185/CTK/2010 for AY 2007-08 vide its order dated 17/06/2011, on sim....
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....smooth conduct of the business such as installing traffic signals at circle near the vicinity of the Office, flood relief etc., and following the Union Government's CSR policy, NMDC has to create budget mandatorily at Rs. 104 crores (2% of PBT) whereas, company has spent only Rs. 71.20 crores. The A.O. however, held that the amount is not related to the business of the assessee and they are in the nature of donations which cannot be allowed under section 37(1). Ld. CIT(A) confirmed the same. 41. At the outset, it was submitted that similar issue was allowed by the ITAT in earlier years and the latest being ITA.No.714 & 885/Hyd/2012 dated 28.02.2014 wherein this issue was examined and allowed vide para 35 as under : 35. We have considered rival submissions and perused the record. We find that the issue in dispute is squarely covered by the decision of coordinate bench in assessee's own case for AY 2005-06 in ITA No. 1791/Hyd/2008 dated 30/09/2009 wherein it has been held as follows: "14. We have considered the rival submissions on either side and also perused the material available on record. No doubt the assessee incu....
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...., we set aside the orders of the lower authorities and delete the entire addition." 36. Since the issue under consideration is identical to that of AY 2005-06, we delete the additions made under the heads from (i) to vii). 36.1 However, we make it clear that the expenditure incurred at Rs. 3,48,04,548/- shown as miscellaneous expenses cannot be allowed as the assessee has not furnished the details of expenditure, therefore, in the absence of requisite information the said expenditure cannot be allowed. Accordingly, this ground is partly allowed. 42. AO is directed to examine the expenditure in this year also and allow accordingly. Ground No.5 is considered allowed. 43. Ground No.6 pertains to allowance of additional depreciation claimed by the assessee on machinery used for production of iron ore / diamonds to an extent of Rs. 7,74,23,161/-. This claim is similar to ground No.3 decided in ITA.No.1794/Hyd/2013 vide para No. 22. In the light of discussion therein, assessee is eligible for additional depreciation. Accordingly, ground No.6 is allowed. 44. In the result, ITA.No.1795/Hyd/2013 of the assessee is partly allowed. ITA.No.1793/Hyd/2....
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....in 295 ITR 282 has held that when there are two views possible and the AO has taken one view, the order of the AO cannot be considered as erroneous and hence the CIT cannot exercise revisional power u/s 263. As pointed out above, the provisions for an accrued existing liability, even though, the actual expenditure may take place at a later date, is an allowable deduction and the CIT erred in treating it as an unascertained liability. Therefore, we set aside the order of the CIT passed u/s 263 and the order of the AO is restored." 9.1 The above decision relied upon by the AR of the assessee, though, it was delivered in assessee's own case for AY 2006-07 cannot be applied to the facts of the case as that order was delivered by the Tribunal in connection with the order passed u/s 263. The order passed u/s 263 read with section 143(3) and the order passed u/s 143(3) read with section 251 are standing on different footing. The scope of section 263 is not par with the provisions of section 251 of the Act. Being so, we cannot borrow support from the order of the Tribunal passed in ITA No. 991/Hyd/2011 for AY 2006-07, on which reliance placed by the assessee's counsel. ....