TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 629
X X X X Extracts X X X X
X X X X Extracts X X X X
.... addition of Rs. 2517.21 crores made by the Assessing Officer and sustained by the CIT(A), on account of suppression of export sales by under-invoicing, allegedly done by the assessee. 3. We may take up first the issue relating to legality and validity of reopening of assessment by the Assessing Officer. 4. Facts in brief relating to this issue are that the assessee, a public sector undertaking engaged in the business of mineral exploration, has field its return of income for the assessment year 2008-09 on 27.9.20008, admitting total income of Rs. 4908,58,41,140. Though the said return was initially processed under S.143(1) of the Act, regular assessment was completed under S.143(3) of the Act on 27.12.2010, and by virtue of an order passed under S.154 of the Act on 21.3.2011, assessee's income was ultimately determined at Rs. 5013,10,78,245. 5. Subsequently, the Assessing Officer basing on the Newspaper report published and the report of the Hon'ble Lok Ayukta of Karnataka observed that the assessee has been resorting to suppression of the value of sale towards export of iron ore during the periods 2006-07 to 2009-10. Accordingly, he reopened the assessment for the assessment y....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is seen that the Assessing Officer, after recording his reasons for reopening, issued Notice u/s 148 and thereafter on the request of the appellant communicated the reasons for reopening on 29-12-2011. Simultaneously; he issued a Notice u/s 143(2) requesting appellant to appear before him on 9-1-2012. Though the appellant is aware of the proceedings before it for assessment year 2009-10 and the reasons for reopening of the assessment year 2008-09, did not even raised any objection on 9.1.2012 to the proposed reopening and chose to be silent. The appellant did not even respond with any objections before the reasonable time of 15 days. Only after commencement of the proceedings, the appellant raised its objections on 23-1-2012 i.e.. nearly a month after communication of the reasons for reopening. The sum and substance of the Hon'ble Supreme Court decision that due procedure to be followed before assessment proceedings, is that objections, if any, to be filed by the appellant within a reasonable time and to be addressed by the Assessing Officer before proceeding with the assessment. In the present case, the appellant responded to the communication of reasons for reopening only af....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 available in the form of newspaper reports and also report of Lokayukta, we are of the opinion that there is prima facie belief for reopening the assessment. Therefore, grounds raised by the assessee on this issue are rejected. We do not intend to examine the various case law relied upon by the assessee which are given in particular set of facts. Since the assessment order itself contains the steps taken consequent to the information obtained in the form of newspaper reports as part of the order itself, we are of the opinion that in the given set of facts, we cannot hold that AO has no reason to believe at the time of reopening the proceedings. Accordingly, this ground is rejected." Facts and circumstances of the case leading ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 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 iron ore during the same period are very high. Moreover, he also came to a conclusion that the persons who have signed the agr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cer that there is under invoicing of exports. 13. The CIT(A) however, did not agree with the assessee's contention and after elaborate discussion of the matter in paras 6.4 to 6.4.5 on pages 23 to 26 of the impugned order, ultimately upheld the addition made by the Assessing Officer by concluding in para 6.5 as under : "6.5. 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." 14. Aggrieved by the above order of the CIT(A), assessee is in second appeal before us. 15. We heard both the parties and perused the impugned orders of the Revenue authorities and other material available on record. We find that similar additions made by the Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 audited by Chartered Accountants. The system of accounting followed by the assessee is the Mercantile System as per the provision of section 145 of the Act and we find that no fault has been found therein nor 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 realization on account of sales beyond what is recorded in the books of accounts. As per th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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." 16. Consistent with the view taken by the coordinate bench of the Tribunal in its order dated 9.5.2014 in assessee's own case for the assessment years 2007-08 and 2010-11, for the year under appeal, viz. assessment year 2008-09 as well, we delete the impugned addition of Rs. 2517,21,27,295, allowing the grounds of the assessee on this issue. 16.1. Before parting, we would like to observe that, as was the case in assessment year 2007-08, in the present assessment year also, there is difference between export sales declared by the assessee and export sales considered by the Assessing Officer. The learned Authorised Representative has submitted before us that actual export sale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TA No.1795/Hyd/2013. We find that the coordinate bench of this Tribunal, vide paras 9 and 9.1 of its order dated 28.2.2014 for assessment year 2008-09, cited supra, decided the issue in the following manner- "9. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below as well as the decisions cited. In AY 2006-07, the coordinate bench in assessee's own case (supra), held as follows: "11. We have heard both the parties, perused the record and gone through the orders of the authorities below. It is observed that the basis of calculation for the relevant AY 2006-07 for Rs. 71.18 crores was submitted during the original assessment and accepted by the AO. The detailed calculation of Rs. 21.31 crores charged to P&L A/c (on the basis of Rs. 71.18 crores) was also enclosed and produced before the CIT. Hence, the CIT is wrong in his observation that the estimate of Rs. 21.31 crore is excessively on a higher side and absolutely no realistic or rational basis for such calculation. 12. The CIT is not correct in invoking the provisions of section 263 as we find that the issue is debatable and when two views are possible the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er dated 9.5.2014 for the assessment year 2010-11 in ITA No.1795/Hyd/2013, though held that mine closure obligation is not a contingent liability, but an ascertained liability, restored the matter to the file of the Assessing Officer, for recomputing the disallowance, in the following manner- "48. Respectfully following the above decision, we hold that mine closure obligation is not a contingent liability but ascertain liability. However, it has to be verified that whether assessee has made the claim on the mines which are in working condition which are being operated or not. If the assessee has made the claim on mines which have not started operations, the same cannot be allowed. As rightly held by the CIT(A) in A.Y. 2008-09, ascertainability of liability is to be ascertained year-wise. Therefore, to that extent, following the Coordinate Bench decision, we direct the assessee to furnish the relevant data to the A.O. towards the mines closure obligation and A.O. is directed to verify and allow the amount accordingly. Subject to the above observations, the ground No.2 is considered as allowed for statistical purposes." 21. In this view of the matter, following the consistent view ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 a intangible asset. It is nobody's case that the land either belonged to the lessee or to the Government. This simply indicates that a depletion of the land against the payment of premium it was leased has to be claimed after capitalization thereof by the assessee which is for the purpose of its main business. All expenses are incurred for the purpose of business and are incidental to the holding of rights were claimed u/s.32(1)(ii) being the license to carry out the mining therefore could not be denied insofar as the Government and the lessee are in control of the asset. The definition of depreciation therefore has been misconstrued for the purpose of allowing deduction by the Assessing Officer and the learned CIT(A) in holding a view on the promulgation of Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he parties, perused the record and have gone through the orders of the revenue authorities as well as the decisions cited. This issue is squarely covered by the Hon'ble Bombay High Court in the case of CIT Vs. Cinceita (P) Ltd. (supra), wherein the Hon'ble Court held as follows: "Although the period of the lease was for 20 years and there was option for renewal the expenditure was the only 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 conclude....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowance made by the Revenue authorities in this regard, we direct the Assessing Officer to allow depreciation for the year under appeal as well, in tune with the directions of the Tribunal for the other years noted above. Assessee's grounds on this issue are accordingly treated as partly allowed. 26. The next effective grievance of the assessee in this appeal relates to addition of Rs. 33,30,05,797 made by the Assessing Officer and sustained by the CIT(A), by disallowance of assessee's claim for expenditure stated to have been incurred in discharge of corporate social responsibility. 27. We heard both sides and perused the orders of the Revenue authorities on this issue and other material available on record. It has been brought to our notice by the learned counsel for the assessee, which has not been not controverted by the learned Departmental Representative, that this issue is covered by the decisions of the Tribunal in assessee's own cases dated 28.2.2014 for assessment year 2008-09 in ITA No.714/Hyd/2012 and dated 9.5.2014 for assessment year 2010-11 in ITA No.1795/Hyd/2013. We find that the coordinate bench of this Tribunal, vide para 35, 36 and 36.1 of its order dated 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e children of the assessee's employees in the medical college. Therefore, indirectly the contribution made by the assessee takes care of the education of the employees' children. This would certainly be a welfare measure on the part of the assessee for carrying out the business in an effective and efficient manner. Therefore, in our opinion, the contribution of Rs. 5,00,00,000 has to be treated as revenue expenditure for the purpose of the business. Therefore, we do not find any justification in disallowing the sum. Accordingly, 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." Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide paras 41 ....