TaxTMI 
TaxTMI 
2024 (2) TMI 276
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.... 2011-12 as a lead case and result of the same shall be applicable mutatis mutandis to all the appeals under consideration. 3. ITA No. 1147/Mum/2023 In the instant case, the Assessee during the year under consideration was engaged in the business of generation and distribution of power, execution, procurement, commissioning of power plants and financial services and had declared its total income at Rs. 102,14,14,228/- under normal provisions of the Act and Rs. 1093,46,60,900/- for the book profit under section 115JB of the Act, by filing its return of income on 30/09/2011, which was processed under section 143(1) of the Act on 30/08/2012. Subsequently, the Assessee, by revising its return of income on dated 28/03/2013, declared its total income at Rs. 86,35,14,103/- under normal provisions of the Act and "NIL‟ book profit under section 115JB of the Act. Thereafter, the case of the Assessee was selected for scrutiny, which resulted into making the assessment dated 29/03/2014 under section 143(3) of the Act, whereby the income of the Assessee was determined at Rs. 133,93,36,775/- and book profit to the tune of Rs. 1093,46,60,960/- under section 115JB of the Act. 3.1 On....
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....,522/- has been under-assessed. As discussed above, I have reasons to believe that Income chargeable to tax has been under assessed to the tune of Rs. 56,07,90,522/- crores. The case is squarely fit to be reopened with reference to the provisions under section 147/14S of the Income Tax Act, 1961." 4.1 Accordingly, the notice dated 27/12/2017 under section 148 of the Act was issued to the Assessee, in response to which the Assessee by filing its return of income on 25/01/2018 declared its total income at Rs. 57,50,52,140/- after claiming deduction under chapter VIA of the Act to the tune of Rs. 89,35,98,120/-. The Assessee also claimed carry forward of long-term capital loss of Rs. 2,07,07,65,293/-. 4.2 The AO, in order to verify the return of income filed by the Assessee in response to notice u/s 148 of the Act, issued the statutory notices under section 143(2) and 142(1) of the Act and also provided the reasons for reopening of the case to the Assessee, against which the Assessee vide letter dated 19/03/2018 filed its objections, which were disposed of by the Assessing Officer vide order dated 13/12/2018. 4.3 As per Assessment order, the Assessing Officer in orde....
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....ties for the coal requirements and the lowest quote is selected for purchase of coal. We provide herewith the following documents In support of transactions for purchase of coal: • Statement giving details of Imported coal purchased during the year as per books. • Copy of Invoices along with supporting documents namely contract copy, certificate In Form B from the Ministry of Trade of the Republic of Indonesia. Bill of Entry, Certificate of sampling, weight etc. • Copy of the proposal note and quotations taken from the various parties. The company has also deposited the custom duty on import of coal at the applicable rate on the value of imports amounting to Rs. 16,75,22,035/-, The Electricity business of the company Is regulated by the Maharashtra Electricity Commission ("MERC"). R Infra has been granted a Distribution License of relectricity in Mumbai suburban area and area falling under Mira Bhayender Municipal Corporation, Being a regulated entity, the tariffs charged by the company to its consumers are approved by the State Commission, I.e. MERC. The tariffs set by the MERC are meant to recover the cost of supplying electricity t....
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.... LoAs issued by the latter to them, The Coal, however, was shipped directly from Indonesia to India. 7.2 Intermediary firms raised invoices on R-Infra at Inflated price mentioned In the latter to the former. It appears from the investigation done by Department of Revenue Intelligence that the Intermediary firms were merely Invoicing agents for facilitating Invoice Inflation. The intermediary firms appear to have received remittances towards value of Invoices raised on the assessee in India, which included the over-valued portion of the price. 7.3 Looking at the above case from the perspective of normal commercial prudence and due diligence, payment of such huge amounts running Into more than few crores over and above the actual value of the goods appears to be unusual and highly Irregular, When the actual suppliers were selling the Coal, at a much lower value, no prudent business entity would pay so much more than the actual value of the goods to Intermediary firms with no known bona fide value addition and more so by foregoing the duty benefit available to the imported goods on production of certificates In Vorm-Ar, added to their cost, IN the Instant case, the C....
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....where by Interacting with them. 7.6. The conduit companies i.e. Intermediary Firms that have been used are as: i. Reliance Natural Resources Ltd. (RNRL); Imports only upto Oct., 2010, 4 consignments. ii. Larimar Holdings Ltd,, Jersey ("LHL"); A British crown dependency and tax haven. 11 consignments, stopped as Invoicing agent from May, 2011 due to S.94A of l.T. Act, 1961, ITEA with Jersey only in 2012. iii. Epic Alloy Steel Pvt. Ltd, Raigarh, only one consignment. Iv. Century Exports Ltd., Hong Kong, ("CEL"): Tax haven, after May, 2011 all consignments Invoiced through It (21 In number); one Sandeep Kumar Dhanuka Is its sole Director and 100% equity holder, he Is an Indian passport holder residing in Hong Kong at the registered address of GEL, 7.7 In respect of the Coal imported by assesses, documentary evidence (Invoices of actual suppliers etc.) pertaining to back- to-back transaction between the intermediary firms and the actual suppliers in relation to consignments Imported by assesses are available, based on which the actual value of the Coal Invoiced by the Intermediary firms for Individual consignments could be estimated....
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....costing date provided by power generation, By overvaluing the Coal imports, the power generator, i.e. Assessee, appear to have illegitimately managed to increase landed cost of the Coal, which is primary fuel in Coal based thermal power plants. The higher tariff dispensed by the regulators to the power generators enhances the cost of purchase of the power distributors which In turn is passed on to ultimate consumers benefiting to power generating companies. 7.11 The intermediary firm-wise extent of over-valuation for A.Y. 2011-12 relevant to F.Y. 2010-11 Is tabulated as below: Sl. No Name of the Intermediary firm (Name of Importer) Financial Year Declared CIF Value (Rs.) Actual CIF Value determined (Rs.) Extent of over- valuation (Rs.) 1. RNRL 2010-11 63,36,23,178 59,58,78,459 3,77,44,179 2. LHL Jersey 2010-11 122,73,93,460 111,89,31,084 10,84,62,376 3. Epic 2010-11 23,33,34,835 21,87,51,408 1,45,83,427 TOTAL 209,43,51,473 193,35,60,951 16,07,90,522 8.1 As discussed above in summary of Inter connectedness among the buyers and their ' authenticity, It Is clea....
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....us means. While dealing with the issue of LTCG, one has to examine the financials of the company whose shares were inflated,..ln the instant case, financials were examined by us and we find that the financial worth of the company is meager and not at all worth to be invested therein," 8.4 In view of the above discussion and judicial pronouncements, the contentions of the assessee are rejected and it is concluded that the assessee has purchased coal of Indonesian origin, which were purchased from intermediaries at an inflated rate than the actual value of such coals sourced from the original suppliers'. Therefore, the inflated coal expenses of Rs 16,07,90,522/- are disallowed and added back to the total Income, 8.5 As the assessee has inflated the cost-of coal expenses of Rs. 1,6,07,90,522/- and claimed the same in the Profit and Loss Account, therefore, penalty proceedings are initiated separately under section 271(1)(c) of the Income Tax Act, 1961 for inaccurate particulars of income." 5. The Assessee being aggrieved, challenged the said addition before the Ld. Commissioner, who vide impugned order by analyzing the peculiar facts and circumstances of the c....
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....eing aggrieved is in appeal before us. The Ld.DR more or less claimed as under: - PLEA 1. Appellate bodies orders are delivered in the case of different Assessee. 2. There is nothing to suggest that facts are similar to Assessee. Intimation u/s 28(9A) of the Customs Act , 1962 referred to by the Assessee is in the context of recovery of duty / interest not paid or short-paid or erroneously refunded to person chargeable to duty/ interest. It is with regard to applicability of Clause (a) of section 28(9A) of the Act. It does not suggest anything related to the issue on hand. (9) The proper officer shall determine the amount of duty or interest under subsection (8),- (a) within six months from the date of notice, 3* in respect of cases falling under clause (a) of sub-section (1); (b) within one year from the date of notice, 3 * in respect of cases falling under sub-section (4). [Provided that where the proper officer fails to so determine within the specified period, any officer senior in rank to the proper officer may, having regard to the circumstances under which the proper officer was prevented from determining the amount of duty or int....
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....ted to import of coal required for generation of power. The Assessee follows a proper procedure for purchase of coal. Quotations are called from various parties for the coal requirements and the lowest quote is selected for purchase of coal. The Assessee has purchased / imported coal transparently and based on price linked to international coal-indices and therefore it cannot be said that the Assessee has purchased / imported coal at high / inflated price. The Assessee's business is a regulated business and the Assessee under no circumstances can inflate the cost or reduce its revenue. The electricity business of the Assessee is regulated by the Maharashtra Electricity Regulatory Commission ("MERC"). Being a regulated entity, the tariffs charged by the Assessee to its consumers are approved by the State Commission i.e. MERC. The tariffs set by the MERC are meant to recover the cost of supplying electricity to the consumers in its License area along with the allowed Return on Equity. The business is cost plus business. All the expenses incurred namely cost of fuel, power purchase, other operating cost etc. are pass through. Any increase or decrease in cost of p....
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....9 which was subsequently withdrawn by the Department as stated in the Supreme Court Order in Civil Appeal No.1666/2020 dated 24.01.2023 (Copy enclosed and marked Annexure "A"). DRI Show cause notice in Assessee's case As stated earlier, the assessment proceedings were reopened based on the information by way of DRI show cause notice in the Assessee's case. The Assessee has made detailed submissions in respect of the said show cause notice. Pr. Commissioner of Customs (Adjudication) has passed a detailed order on 29.11.2023 quashing the show cause notice. The Assessee submits that the entire basis of the reopening of the assessments is now no longer there as the show cause notice of DRI is cancelled by the Pr. Commissioner of Customs. Further the Assessing Officer has not provided any evidence about the inflation of coal price in course of the re-assessment proceedings. The matter of similar addition had come up in the Assessee's case for A.Y.2016-17. DRI show cause notice did not cover the period in A.Y.2016-17. The Tribunal has decided the matter in favour of the Assessee and deleted the addition. The gist of the said Tribunal order is a....
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....de consequential order dated 27/04/2017 passed by the AO. Subsequently, the case of the Assessee was reopened under section 147 of the Act by recording reasons, main part of which is reproduced herein below for the sake of brevity and ready reference: - "Reliance Infrastructure Limited has booked expenditure of Rs. 40 crores as contracts payments to PATH as per the Amended-2 contract, reflecting in the books of the assessee as Expenditure of EPC business and contract Business, which includes subcontract charges in the Profit and Loss Account, which was in turn transferred to Geet Exim Pvt. Ltd by PATH after deducting Its commission. No actual work has been done by any of the entitles, either be it PATH or Geet Exim and the money was transferred out without utilization for any of the business purposes. 'Back to back' payments were made to Geet Exim Pvt, Ltd, by PATH without actual execution of contractual work. The expenditure to the extent of Rs. 40 crores Is not genuine and the sub-contract expenditure has been Inflated by the incorporation of this non-genuine expenditure. Therefore, I have reasons to believe that the Income chargeable to tax to the extent of Rs. ....
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....ore, the expenditure to the tune of Rs. 16,07,90,522/- is not genuine. Consequently, the Assessee was asked to furnish complete details of expenses debited to its profit & loss account under the head "cost of fuel‟ along with copies of invoices, LoS, ledger account, bank statement reflecting the transactions. 8.2 In response to said notice dated 02/02/2018 under section 142(1) of the Act, the Assessee vide letter dated 19/03/2018 more or less claimed as under: "That electricity business of the company is regulated by Maharashtra Electricity Regulation Commission (MERC). The Assessee's business is of cost-plus business. All the expenses incurred, namely, cost of fuel, power purchases, other operating cost, etc. are pass-through costs. Thus, any increase or decrease in cost of power sold would result into increase / reduction in tariff, respectively without having the profitability from the business. The tariffs charged by the Assessee from its customers / consumers are approved by the said Commission, i.e. MERC. Tariffs set out by the MERC are meant to discover the cost of supplying electricity to the consumers in its licensed area along with the allowed return on ....
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....rt of the modus-operandi. The Assessing Officer also observed that the conduit companies i.e. intermediary firms that have been used as mentioned below:- "I, Reliance Natgral Resources Ltd. (RNRL); Imports only upto Oct., 2010, 4 consignments. II. Larimar Holdings Ltd,, Jersey ("LHL"): A British crown dependency and tax haven. 11 consignments, stopped as Invoicing agent from May, 2011 due to S. 94A of I.T. Act, 1961, ITEA with Jersey only in 2012. III. Epic Alloy Steel Pvt. Ltd, Raigarh, only one consignment, IV. Century Exports Ltd., Hong Kong, ('GEL"): Tax haven, after May, 2011 all consignments Invoiced through It (21 In number); one Sandeep Kumar Dhanuka Is its sols Director and 100% equity holder, he Is an Indian passport holder residing in Hong Kong at the registered address of CEL." 8.4 The Assessing Officer also observed that coal of Indonesian origin was exempted from customs duty with effect from 01-10-2010 subject to submission of country-of-origin certificate in Form-AI issued by Indonesian authorities. The Assessing Officer tabulated the firm-wise over valuation for the assessment year under consideration which is reproduced b....
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....hat the Ld. Commissioner while deleting the addition under consideration also mainly relied upon the order passed in Knowledge Infrastructure Systems Pvt. Ltd (supra) by CESTAT, Mumbai 8.8 It is a fact that issues involved in this case and in the case of Knowledge Infrastructure Systems Pvt Ltd are exactly similar, wherein the order in original dated 23/12/2016 has also been set aside by the Hon'ble CESTAT vide its order No.A/86617-86619/2018 dated 31/05 /2018. 8.9 Affirming the said facts, even the Customs Department through Additional Director General (DRI)(Adjudication), Mumbai, vide intimation dated 25/03/2019 under section 28(9A) of the Customs Act, 1962, has also clearly intimated that the issue involved in show cause notice No.F.DRI/Mizu/F.Int/154/2014 dated 31/08/2016 issued to M/s Reliance Infrastructure Ltd and 4 other entities is similar to the one dealt in the matter of Knowledge Infrastructure Systems Pvt Ltd, the same is covered under clause (a) of section 28(9A) of the Customs Act, 1962. In the first para of said intimation it is clearly written and acknowledged that Hon‟ble CESTAT, Mumbai vide order dated 31/05/2018 (supra) in appeal filed by Knowledge I....
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.... instant case by holding as under:- "47. We have heard rival submissions and perused the relevant finding given in the impugned orders. For the purpose of generation of electricity plant at Dahanu which requires coal as a primary fuel for generation of power, assessee purchased coal from M/s. Century Exports Ltd. Hongkong based company for supply of imported coal to Dahanu thermal power station at agreed standard terms and conditions. The assessee had purchased imported coal from CPL Hongkong based on price linked to international coal-indices. The entire basis of the addition was made by the ld. AO is the information received from DRI, Mumbai for A.Y.2011-12 to 2015-16, wherein it had investigated the case of over valuation in the import of coal of Indonesian origin. The case of the ld. AO is that intermediary firms were merely invoicing agents for facilitating invoice inflation which has effect of artificially raising the power tariff fixed by the respective state electricity regulatory commission. The ld. CIT(A) has merely stated that the ld. AO has not brought out profitability and the over valuation of coal as an effect of artificially raising the power tariff fixed b....