TaxTMI 
TaxTMI 
2017 (4) TMI 757
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....0/-. The said return of income was revised on 10/3/2006 disallowing transport expenditure u/s 40a(ia) of Rs. 49,80,906/-. Thus revised return was filed disclosing income of Rs. 3,79,29,500/-. Against the said return of income, assessment was completed u/s 143(3) on 27/4/2006 at a total income of Rs. 3,79,29,500/-. 2.2 Subsequently, the Commissioner of Income-tax [CIT] exercising power vested u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] set aside the assessment order vide his order dated 27/4/2006. We are informed at the Bar that no appeal was filed against the order of the CIT passed u/s 263. Consequent to this 263 order, assessment order was passed u/s 143(3) r.w.s 263 vide order dated 31/12/2009 determining the total income at Rs. 5,09,51,155/-. While doing so, the Assessing Officer [AO] disallowed excess claim of deduction u/s 80HHC of Rs. 1,23,73,932/- and made addition on account of undervaluation of closing stock of Rs. 66 lakhs. 3. Being aggrieved, an appeal was preferred before the CIT(A) and the same was dismissed by the impugned order. 4. Being aggrieved, the assessee is in appeal before us in the present appeal rai....
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....IT(A) erred in upholding the order of Ld. AO who has compared the total purchases with export sales, ignoring the purchases made for domestic sales. The Appellant seeks your leave to add, alter, amend or delete any of the grounds urged at the time of hearing. 5. Ground Nos.1 to 3 are general in nature and do not require any adjudication. 6. Ground No.4 relates to calculation of deduction u/s 80HHC of the Act. The AO, while calculating deduction u/s 80-HHC of the Act, had reduced expenditure incurred on stewardship and transport charges of Rs. 1,64,24,612/- and also reduced transportation charges disallowed of Rs. 49,80,906/- from export turnover and accordingly computed deduction as a result of which it has resulted in reduction of claim by Rs. 59,52,277/- as against the claim of Rs. 1,23,73,932/- originally allowed. The contention of the assessee-company that the expenditure of Rs. 1.64 crores is in the nature of steward and clearing and forwarding charges and not on account of freight and insurance charges. It is submitted that the expenditure was incurred within the premises of customs station and therefore, according to the assessee-company, this expenditure need not b....
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....res was the cost incurred for export of domestic sales, is not accepted by the AO. Same submissions were reiterated before the CIT(A) also. The CIT(A) had confirmed the addition as the assessee-company had failed to substantiate it submission. Before us also, no evidence was filed substantiating the explanation for discrepancy in valuation of the closing stock. Even before us, altogether different argument was advanced saying that domestic sales were not taken into consideration while valuating closing stock. It is altogether a new submission and does not emanate from the orders of the lower authorities and no evidence was filed even in respect of this argument. Hence, the ground of appeal cannot be accepted and dismissed as such. 8. In the result, the appeal filed by the assessee is dismissed. ITA No.1009/Bang/2015 (Asst.year: 2007-08): 9. This is an appeal filed by the assessee directed against the order of the Commissioner of Income-tax (Appeals)-11, Bangalore, [CIT(A)] dated 16th January, 2015 for the assessment year 2007-08. 9.1 Briefly facts of the case are that the assessee is a company duly incorporated under the provisions of the Companies Act, 1956. It is e....
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....us chemical grades to arrive at the required grade of saleable iron ore products, thus ROM purchased has to undergo various procesyo eliminate and reduce silica and alumina before the same is being converted in to marketable product with completely distinctively name as 'iron ore' only then the product is eligible for export. 8. The CIT (A) ought to have considered that the appellant has established the Export Oriented Unit (EOU) under the ECU scheme in terms of Chapter 6 of the Foreign Trade Policy 2004-09. The EOU has been set up for manufacture of goods as permitted in the LOP/LUT and export thereof. The trading units are excluded under the ECU Scheme. 9. The Ld. CIT (A) erred in confirming the order of the AO wherein the AC has ignored the submissions and various decisions relied on by the appellant with regard to claim of exemption under section 108 of the Act. Disallowance of transportation expenses of Rs. 15,54,39,225 10. The Ld. AO erred in disallowing transportation expenses of Rs. 15,54,39,225 and Ld. CIT(A) erred in confirming the same. 11. The Ld. CIT(A) erred in confirming the order of Ld. AO who disallowed the transportation expenses on the ground t....
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.... • Washing - To Remove Shale And Silicates • Crushing - inherent FE. Content gets exposed to oxygen and PEG increases • Blending - Chemical Character As Required For Sale Will Be Achieved 4.8. Now we would like to describe in detail the various activities we conduct in EoU division in support of our claim I. Procurement of ROM (Run of Mines)/ Waste dump/ Sub grade (over burden ) -Raw Material ROM is just earth excavated from the pit of Mine. Generally this is the basic raw material for production of any mineral. Waste dump is a rejection which is generally called overburden in mining terms. Run of Mines related to Iron Ore contains various impurities such as silica, shale, laterite, quartzite along with Ferrous Generally the size of the ROM shall be from 0 to 150mm. We gererally procure ROM from traders and Mine Owners. The ROM is subject to below process of filtration and screening, sieving , washing, density separation, blending of various chemical grades to arrive at the required grade of saleable iron ore products. The same is with overburden /sub grade raw material except in this material generally impurities will be much higher (....
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....Iaterite and shale particles which generally would have in the form of layer held on ore lump due to inherent moisture. The washed material Lump which is also called as undressed lumps. * Dressing, Sizing:- The thus washed undressed filtered ROM is conveyed to the plant for dressing wherein it is passed through three stages of beneficiation such as primary filtration, secondary filtration and crushing thereby sizing and dressing of the ROM is ensured which generates final distinguishable saleable product called as calibrated ore of 1omm - 4omm and iron ore fines called as Iron ore fines. * Blendingz- Based on the Ferrous content the various iron ore fines and calibrated iron ore is blended to meet the export requirements. * Transportation to the harbour: - the saleable cargo produced is moved by trucks to the harbour for exports. * Stacking of the iron ore at the harbour:- The ore is unloaded and stacked as different stock piles basis physical and chemical composition. * Loading into the ships:- The cargo is thus loaded into the ships by means of mechanised ore handling equipment. 11.2 Learned AR of the assessee also explained that the following process was conduc....
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....erein the AO dealt with the actual activity carried on by the assessee-company extensively. He further submitted that only an assessee who is engaged in the business of extraction of iron ore from earth is alone be called a manufacturing activity within the meaning of the decision of the Hon'ble Supreme Court in the case of ITO vs. Arihant Tiles and Marbles P. Ltd. (320 ITR 79). He thus submitted that since assessee-company is only a trader in iron ore, it is not entitled to deduction u/s 10B of the Act. 12. We heard rival submissions and perused material on record. The only issue in these grounds of appeal is whether the assessee-company is eligible for deduction /s 10B of the Act. The AO had denied claim for deduction u/s 10B solely on the ground that the assessee-company is not engaged in any activity of manufacture or production of an article or thing which is a pre-requisite for claiming deduction u/s 10B of the Act. Admittedly, assessee-company was not in the business of extracting iron ore from earth. The assessee-company buys iron ore after carrying out certain process as a result of which the impurities from iron ore are removed and iron ore so generated is exported out....
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....ng of the expression 'manufacture' was considered by this Court in Dy. CST v. Pio Food Packers [1980] 46 STC 63 among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. Pathak, J., as he then was, stated the test in the following words : "... Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place...." The word 'production' or '....
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....cts, the question being whether the assessees were industrial companies - they do contain observations which tend to support the stand of the revenue. 12.2 Again, the Hon'ble Supreme Court in the case of Aspinwall and Co. v. CIT [2001] 251 ITR 323 (SC) held that in the absence of a definition of word 'manufacture' it has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combination whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity. 12.3 Furthermore, reference can be made to the decision of the Hon'ble Gujarat High Court in the case of CIT v. Prabhudas Kishordas Tobacco Products (P.) Ltd. [2006] 282 ITR 568, 573 (Guj), wherein it was held as follows: "The tests to ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the apex court and this High Court. Broadly, the requirement is that the raw material must be, in the fi....
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....wo-fold test for deciding whether the process is "manufacture". First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist. Secondly, whether the commodity which was already in existence will serve no purpose but for the said process. Applying the two-fold test, it was held that printing on bottles does not amount to manufacture. In Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 (SC) confirmed by a Constitution Bench in Ujagar Prints v. Union of India [1989] 179 ITR 317 (SC), (see also Chowgule and Co. Private Ltd. v. Union of India [1981] Tax LR 2929 (SC), it has been observed that whatever may be the operation, it is the effect it has on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of "manufacture". Any process or processes creating something else having distinctive name, character and use would be "manufacture". Manufacture has been held to mean (as a noun) signifying the production of an article for use from raw or prepared materials, by giving these materials new form, quality, properti....
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....and it is required to be changed into various shapes and sizes so that it can conveniently be used, no transformation takes place if the character and the end use of the first product continue to be the same. An illustration of this principle is brought out by the judgment in CCE v. S. R. Tissues (P.) Ltd. [2005] 5 RC 28. On facts, in the said case, jumbo rolls of tissue paper were cut into various shapes and sizes so that they could be used as table napkins, facial tissues and toilet rolls. The court held that there was no manufacture as the character and the end use of the tissue paper in the jumbo roll and the tissue paper in the table napkin, facial tissue and toilet roll remain the same. Another example of when transformation does not take place is when foreign matter is removed from an article or additions are made to the article to preserve it or increase its shelf life. If the essential character of the product has not changed, there would be no manufacture. However, if by adopting a particular process a transformation takes place which makes the product have a character and use of its own, which it did not bear earlier, then such process would amount to manufacture irrespe....
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....ration. In these cases also no manufacture of goods takes place. (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place. " 12.9 Further, the Hon'ble Supreme Court in Servo-Med Industries (P) Ltd. vs. CCE (2015) 32 GSTR 404 (SC) held that process by which goods are made marketable cannot be called a manufacturing activity. Manufacture takes place on application of one or more processes, each process may lead to a change in goods but every change does not amount to manufacture. There must be something more i.e. there must be transformation by which something new and different comes into being i.e. there must now emerge an article which has distinct name, character or use. The Hon'ble Court went on to explain concept of transformation. It is explained that when a finished product cannot conveniently be used in the form into which it happens to be and it is required to be changed into various size and shape so that it can conveniently be used no transformation takes place if the character and end-use of the first ....
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....tion to non EOU business of the assessee-company thereby reducing tax liability of the assesseecompany. The relevant findings are in paras.7 & 8 of the assessment order which are reproduced below: 7. While going, through the books of accounts of the company, the company has shown to have incurred expenditure on transportation to the extent of Rs. 32.05 Crores in respect of non EOU business. Out of the above, the company claimed cash expenses to the extent of Rs. 15,54,39,225/- mostly on transportation charges in respect of the said non EOU business of the company. 8. It may be noted that the company has shown profits to the extent of Rs. 5,08,00,512/- only on a turn over of about 125 Crores in respect of non EOU business which, as percentage of total turn over, amounts only 4°% against 33.49% in respect of EOU business of the company. Assessee has no proper explanation as to why such huge variation in profit percentage particularly in view of the fact that there was no value addition in EOU business. Against this back drop, on Verification of expenses and cash book etc. it was found that the company incurred huge expenses in cash for which no details were furnished. When ....
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....ility between EOU and non-EOU had raised the eye-brows of the AO. Accordingly, the assessee-company has not been able to prove genuineness of the expenditure incurred. Mere filing of ledger account, copy of expenditure depicting the name and address, truck number, does not absolve the assessee-company of proving the expenditure. It is settled principle of law that mere entry in books of account neither establishes accrual of income nor incurring of expenditure. It has to prove conclusively that the expenditure was actually incurred wholly and exclusively for the purpose of business. The very fact that the entire transport expenditure was incurred in cash and no TDS was deducted also leads one to suspect the genuineness of the expenditure. The assessee-company had made no effort to conclusively prove that this expenditure was incurred wholly and exclusively for business purpose. Entry in the books of account is self-made entry, no credence can be given unless and otherwise corroborated by independent evidence. Mere entry in the books of account alone does not enable assessee to claim deduction Kedarnath Jute Mfg. Co Ltd. v. CIT (82 ITR 363)(SC) Sutlej Cotton Mills Ltd. vs. CIT (116 ....
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....e Supreme Court in the case of CIT Vs. Imperial Chemical Industries (India) Pvt. Ltd. (1969) 74 ITR 17 has unequivocally held that the burden of proving that a particular expenditure had been laid out or incurred wholly and exclusively for the purpose of business entirely lies on the assessee. Thus, following well settled principles of law, we uphold the disallowance. Grounds of appeal of the assessee-company are dismissed. 20. Ground Nos.18 to 20 relate to disallowance of depreciation on machinery of crushing plant of Rs. 24,86,425/-. The AO disallowed depreciation on the machinery on the ground that since no process of iron ore was involved, machinery was not used for the purpose of business. 21. On appeal before the CIT(A), the same was confirmed. According to the CIT(A), assessee-company had failed to establish that activity of manufacturing of an article was carried on. The assessee-company is in appeal before us. 21.1 It was contended that the plant and machinery was used in crushing for the purpose of processing iron ore and it was also submitted that in the immediately assessment year, depreciation on machinery was allowed. Thus, Learned AR of the assessee....
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....e allowed the claim of exemption under section 108 of the Act as claimed. 7. The CIT (A) erred in coming to a conclusion that appellant purchases processed iron ore and exports the same without any value addition. 8. The CIT (A) ought to have appreciated that the appellant is not required to take any permits under any law under the state to process the ROM and transport the same. Permits are required to be taken by the miners only. 9. The Ld. CIT (A) ought to have appreciated that the ROM is a raw material and not saleable and is subjected to filtration, screening, sieving, seizing, washing, density separation, blending of various chemical grades to arrive at the required grade of saleable iron ore products, thus ROM purchased has to undergo various process to eliminate and reduce silica and alumina before the same is being converted in to marketable product with completely distinctive name as " Iron ore " only then the product is eligible for export. 10. The CIT (A) ought to have considered that the appellant has established the Export Oriented Unit (EOU) under the ECU scheme in terms of Chapter 6 of the Foreign Trade Policy 2004-09. The EOU has been set up for manufac....
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....er sec 153C of the Act. Further, the mandatory conditions under sec 153C also have not been complied in the present case. 8. Copy of the approval of the Ld JCIT before the completion of assessment is not provided to the appellant. Further, LD JCIT did not provide appellant an opportunity of being heard before granting the approval. Purchases of Illegally mined ore 9. The Ld CIT erred in upholding the disallowing under sec 37(1) of the Income tax Act a sum of Rs. 111,05,32,933/- as cost of purchases of illegally mined iron ore. 10. The LD OT (A) ought to have held that the nature of business of the appellant was manufacturing (out of ROM) and trading in Iron Ore and not mining of Iron ore. Thus the activity of trading in iron ore is not tainted with illegality. 11. The Lo CIT (A) ought to have held that invoking explanation to Section 37(1) of the Act when appellant has complied with all the legal requirements of trading in iron ore is not correct in law. 12. The L3 CIT (A) ought to have observed that the AO had not called for an objection from the appellant for the above disallowance. 13. The AO erred in treating the purchases as illegal based on the seized mat....
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....ated under the provisions of the Companies Act, 1956. It is engaged in the business of trading iron ore. It is not borne out of record whether the assessee had filed return of income in normal course. Subsequently search and seizure operations were carried out in the business premises of the assessee-company u/s 132 on 25/10/2010. As a result of search operations, books of account and other incriminating documents were seized and subsequent notice u/s 153A was issued and served on the assessee and in response to same, assessee-company filed return of income on 10/4/2012 declaring total income of Rs. 28,69,62,540/-. Against said return of income, assessment was completed u/s 143(3) read with sec.153A vide order dated 31/3/2013 at a total income of Rs. 1,39,74,95,473/-. While doing so, the AO disallowed expenditure incurred on purchase of iron ore from one Shri Gali Janardhana Reddy [GJR] and his concerns of Rs. 111,05,32,933/- by holding that the expenditure is not allowable in terms of Explanation to sub-section (1) of section 37 of the Act. It is the case of the AO that said GJR was indulging in illegal mining activities and material purchased from such persons cannot be allowed a....
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....een lifted from mines of V Nag, Vyasankar, NEB A Block, MBT, while payments have been to the concern of GJR. This fact enabled the AO to conclude that the very transaction purchase of iron ore from GJR and his concerns is hit by Explanation to sub-section (1) of section 37 and therefore disallowed same. 31. Being aggrieved by the above assessment order, appellant preferred an appeal before the CIT(A) inter alia contending that the very proceedings conducted u/s 132 of the Act are invalid in law as no satisfaction was recorded. The appellant further challenged validity of the assumption of jurisdiction us 153A of the Act. However, CIT(A) held that it was not open to the appellant to question the legality and validity of search and seizure proceedings before appellate authorities. In support of this proposition, CIT(A) has placed reliance on the decision of the Hon'ble Chattisgarh High Court in the case of Trilok Singh Dhillon vs. CIT (2011)41 (1) ITCL 2010. The CIT(A) further held that the decision of the Hon'ble Chattisgarh High Court was approved by the Hon'ble Supreme Curt by dismissal of SLP as reported in 210 Taxman 95(SC). As regards assumption of jurisdiction, CIT(A) uphel....
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....en made in clear violation of the principles of natural justice. Thus, it is submitted that the assessment should be cancelled as null and void. Without prejudice to above submission, it was submitted that there was no corroborate evidence to show that GJR had involved in any illegal mining and even for argument sake, it is assumed that illegal iron ore from GJR is purchased, when income on account of sale of such illegal iron ore is assessed to tax, purchases should be allowed as deduction. Thus, it is submitted that addition on account of purchase of illegal iron ore cannot be sustained in the eyes of law. 32.2 On the other hand, ld.CIT(DR) vehemently opposed the submissions of the learned AR of the assessee. It is submitted that it is conclusively proved that GJR was involved in illegal mining and such illegal iron was purchased by the appellant contravening statutory provisions governing minds. Thus, any expenses incurred in contravention of the plain provisions of any statute are illegal and cannot be allowed as a deduction in view of Explanation to section 37(1) of the Act. Thus, he prayed that the addition may be sustained. He also relied on the decision of the co-ordinat....
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..... It is the fact that the Hon'ble Apex Court has appointed a committee to inquire into illegal mining activity of GJR and his concerns. The said committee, after due inquiry and investigation, gave a report accusing GJR and his concerns of indulging in illegal mining activity. Subsequently, GJR was arrested by the CBI and he was in judicial custody for a long time and finally a charge sheet was filed against him in CBI Court, Hyderabad. In our considered opinion, this evidence is enough to hold that GJR was indulging in illegal mining activity and iron ore mined illegally was sold to several concerns including the appellant. When the appellant was called upon to explain as to why purchases made cannot be treated as illegal in the light of these facts, the appellant had failed to disprove the contention of the AO that the appellant has purchased illegally mined iron ore. This is something which is known to the appellant himself. The appellant was afforded an opportunity by the AO to prove that the iron ore purchased was legally mined. The AO had put forth all the evidence, he gathered during the course of assessment proceedings, to say that the iron ore purchased was illegally mined....
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....930. It is not under dispute that the provisions of the Sale of Goods Act, 1930 applies to this transaction. The Hon'ble Apex Court in the case of State of NCT of Delhi vs. Sanjay [Criminal Appeal No.499 of 2011 dt.04/09/2014] had clearly held that illegal mining activity is not only a criminal offence under the provisions of Mines & Minerals (Development & Regulation) Act, 1957 [MMDR Act] but also against public policy. Needless to mention that violation of the provisions of any statute is not a normal incident of business.[Hazi Aziz & Abdul Shakoor Bros. vs. CIT (1961) 41 ITR 350(SC)]. 35. Now, having held that the purchases made by the appellant are illegal, then the question that arises for consideration is whether this can be allowed as a deduction while computing income under the head 'business' keeping in view the provisions of Explanation to sub-section (1) of section 37 of the Act. The Explanation to sub-section (1) was inserted by the Finance (No. 2) Act, 1998, with retrospective effect from April 1, 1962, which reads thus : "Explanation.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence....
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....or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void." Therefore, no expenditure, which is incurred in blatant violation of the provisions of any Statute cannot be allowed as a deduction out of income arising from lawful business because infraction of law is not a normal incident of such business. It would be a different case if the whole business itself is illegal business and expenses incurred in connection with such illegal business can be allowed as a deduction. In the present case, it is not the case of the appellant that the whole business is illegal business. Under the provisions of section 11 of the Companies Act, 1956, a company can be incorporated only for lawful business. It is a matter of fact that the appellant is a company under the provisions of the Companies Act and therefore, by no stretch of imagination it can be assumed that the company is formed for the purpose of carrying on illegal business. 35.1 The Hon'ble Andhra Pradesh High Court in the case of CIT vs. Maddi Venkataraman & Co.(P) Ltd. [144 ITR 373) had an occasion to deal with identical situation where-in the Hon'ble High Court, af....
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....ness means a lawful business; and it should be carried on according to law. Violation of law is not an incident of such business. Therefore, any penalty or fine paid on account of such violation, or any payment made in furtherance of such violation, cannot be treated as a business expenditure, or business loss. While committing a violation or an infraction of law, the trader or businessman, as the case may be, must be deemed to be acting in a capacity other than that of a trader, or businessman and, therefore, the amounts paid by him on that account cannot be set off against the income from his business. Now, the other principle is this: True it is that an unlawful business is not a business ; but, a man has already carried out such business. It is a fait accompli. For such violation, he may be punished elsewhere; but, there is no reason why he should be allowed to get away with all the profits and gains made in such illegal business, and there is no reason why the state should not tax it. By doing so, it is not condoning the illegal business or trade. Indeed, if in such a case no tax is levied on the ground that the business itself is illegal, it would amount to giving further ben....
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....ity of any other kind. So long as the payment has to be made for infraction of law, it cannot be said that it was made in course of carrying out of the trade. 11. In the case of CIT v. S.C. Kothari [1971] 82 ITR 794 (SC), it was held that the loss which had actually been incurred in carrying on a legal business must be deducted before the true figure relating to profits which had to be brought to tax could be computed or determined. If a business was illegal, neither the profits earned nor the loss incurred would be enforceable in law but that did not take the profits out of the taxing statute. Similarly, that taint of illegality of the business could not detract from the loss being taken into account for computing the amounts which had to be subjected to tax. The tax collector cannot be heard to say that he will bring the gross receipts to tax, he could only tax the profits of a trade or business. That cannot be done without taking the loss and the legitimate expenses of the business. 12. In the case of CIT v. H. Hirjee [1953] 23 ITR 427 (SC), a Bench of four judges of this Court dealt with a case of an assessee who was carrying on the business as selling agent of a company.....
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....ement was made in the course of trade. It must be for the purpose of the trade. The purpose must be a lawful purpose. Moreover, it will be against public policy to allow the benefit of deduction under one statute, of any expenditure incurred in violation of the provisions of another statute or any penalty imposed under another statute. In the instant case, if the deductions claimed are allowed, the penal provisions of FERA will become meaningless. It has also to be borne in mind that evasion of law cannot be a trade pursuit. The expenditure in this case cannot, in any way, be allowed as wholly and exclusively laid out for the purpose of assessee's business. 14. We are in agreement with the view expressed by the High Court in this case. The appeal is dismissed." 35.2 The Hon'ble Punjab & Haryana High Court had an occasion to deal with the provisions of Explanation to sub-section (1) of section 37 of the Act in the case of CIT vs. Kap Scan & Daignostic Centre P.Ltd. (344 ITR 476) wherein, after referring to the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulation, 2002, held that commission paid to Doctors for referring the busines....
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.... of any seized material, search and seizure operation in the premises of the appellant, no 153A assessment can be made. The addition is based on the information retrieved from CPU of a third person in which case assessment can only be made u/s 153C of the Act. 41. We heard rival submissions and perused the material on record. Search and seizure operations u/s 132A of the Act are conducted in the business premises of the appellant on 25/10/2010 i.e. period relevant to assessment year 2011-12 which means regular assessment proceedings are open. Therefore, information gathered as a result of action u/s 132 or otherwise can be used in the assessment proceedings. The fact that the AO mentioned wrong section in the assessment order does not invalidate the order in view of the specific provisions of section 292B of the Act which reads as under: "Return of income, etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid....
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.... Belekeri port was taken at nil as the Government of Karnataka, by order dated 28/7/2010 had banned export of iron ore from all ports of Karnataka. It is the contention of the appellant that it is the policy of the appellant to value closing stock at cost or realizable value whichever is less as the stock cannot be exported, following the orders of the Government of Karnataka, stock was valued at nil whereas it is the contention of the AO that stock can be sold in the domestic market. Therefore, value cannot be accepted at nil. 47. On appeal before the CIT(A), the CIT(A) confirmed the addition made by the AO. 48. Being aggrieved, assessee before us in the present appeal. We heard rival submissions and perused the material on record. No doubt it is trite law that stock can be valued at cost or market value whichever is less. While valuing closing stock at nil, appellant had not brought on record any evidence suggesting that realizable value of the closing stock lying at Belekeri Port is nil, nor the assessee-company brought on record any independent valuation from technical experts in the field. Thus, in absence of evidence on record, we are unable to appreciate the content....
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....t @1000 Rs.5Cr BALANCE TO LIFT 25675 110,000,000 110,000,000 196,440 196,418 BALANCE TO LIFT 243,995,720 AMOUNT DUE 97,495,720 146,500,000 RECEIVED BALANCE TO RECEIVE 245,000,000 (1,004,280) COMMITMENT QTY MBT 100,000 OMC 100,000 VYASANAKERE 250,000 Document 4 DESPATCHED 50,000 250,000 QTY MBT 36,605 VYASANAKERE 13,779 VENAG 4,652 OMC AMOUNT DUE RECEIVED BALANCE TO RECEIVE 70,835 15,800 70,835 BALANCE TO LIFT 179,165 97,495,720 146,500,000 500,000,000 239,000,000 261,000,000 AMOUNT DUE 85.40 AMOUNT RECEIVED BALANCE 26.00 4.4.3 The electronic data retrieved from the seized CPU contains the details of payments received by Mr. G Janardhana Reddy and his concerns for sale of illegally extracted iron ore in the spreadsheet "Phani.xls". The spreadsheet also gives the payment details for the supplies made to ILC for each of the tranches. For the 1 lakh tranche, the payment made is Rs.11 Crores and for the 1,96,418 tranche, it is Rs.24.50 Crores received and for the 25 lakhs tranche, 13.90 Crores out of the Rs.....
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....8 confirmed that Kishore, the Chartered Reddy. From the said Mr Ali Khan alongwith Mr Phani Accountant, were to act on behalf of Janardhana findings found during the course of search as stated above, it has been revealed that the electronic data retrieved from the seized CPU contains the details of payments received by Mr G Janardhana Reddy and his concerns for sale of illegally extracted iron ore in the spreadsheet 'Phani.xls'. The spreadsheet also gives the payment details for the supplies made to ILC for each of the tranches. 6.4. The notings are detailed in the assessment order. When confronted with the seized material as retrieved from the CPU found in Ali Khan's premises, Sri K Somashekar, Director of the appellant company admitted that the appellant company had business transactions with the companies and concerns managed by Sri G Janardhana Reddy and the business concern of Sri Ali Khan. He also stated that the ore was purchased and loaded from V-Naga and Vyasanakere mines as recorded in the Excel statements. However, when questioned about requisite permits for such transportation of iron ore, Sri Somashekar could no....
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....Janardhana Reddy, M/s Devi Enterprises, run by Sri Ali Khan, a confidante of Sri G Janardhana Reddy and M/s Madhusree Enterprises, which in effect is controlled by Sri Janardhana Reddy. During investigations, it was found that M/s Obalapuram Mining Company Pvt Ltd had extracted iron ore illegally by encroaching upon the adjacent forest lands and adjacent mines of other lease holders. The Government of Andhra Pradesh constituted a committee under the Chairmanship of Sri Sammi Reddy, to conduct an enquiry with regard to illegal mining activities of iron ore. On enquiry, the committee found irregularities in respect of the six leases of the company. As regards, M/s Associated Mining Company, it was found that Mr G Janardhana Reddy and his wife Smt G Lakshmi Aruna did not carry out any mining operations in the lease area of mining lease, however permits for production and dispatch of 6.28 lakhs MT of iron ore has been obtained from the Dy Director, Mines and Geology, Hospet. The fact that Mr Janardhana Reddy and his associates were involved in illegal mining activity has been verified and established during the search and further enquirie....
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....ssessing Officer is opposed to law, facts and circumstances of the case 2. The order is passed in haste though the appellant has furnished all the particulars required, as called for from time to time and explained during the course of assessment proceedings. 3. The order is passed based on assumptions and surmises much against the principle of natural justice and thus liable to be quashed. Technical ground 4. The assessment passed is without jurisdiction and proceedings under sec 153 A was not warranted in the present fact pattern. 5. The search is illegal as there was no material in possession of the department as was required under sec 132 of the Act. 6. Sec 153 A only authorizes the AO to call for the Return of Income. The AO erred in completing the assessment under sec 153 A. 7. Without prejudice, the assessment ought to have been completed under sec 153C of the Act. Further, the mandatory conditions under sec 153 C also have not been complied in the present case. 8. Copy of the approval of the Ld JCIT before the completion of assessment is not provided to the appellant. Further, LD JCIT did not provide appellant an opportunit....