TaxTMI 
TaxTMI 
2025 (5) TMI 782
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.... Section 250 of the Act dated 30/03/2024, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies himself liable to be assessed more than returned income on the facts and circumstance, the case. The additions made are all unsustainable in law and contrary to the material on record and consequently liable to be deleted in full or substantially reduced as not in accordance with the scheme of the income tax act. 3. The appellant denies itself liable to be assessed under section 153A of the Act under the impugned order of assessment of assessment passed on the ground: - [i]. That the search initiated in the case of the appellant is illegal and ultra vires the provisions of section 132[1][a], [b] Et [c] of the Act; and [ii]. That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132[2] is bad in law [224 ITR 19 (SC)] and consequent assessment under section 153A is null and void-ab-inito on the parity of the ratio of the decision of the Hon'ble Ape....
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....basis is unjustified and requires to be deleted, on the facts and circumstances of the case. 9. Without prejudice, the Appellant denies itself liable to be assessed on a total income of Rs. 100,99,35,420/- determined by the learned assessing officer and confirmed by the learned Commissioner of Income-tax [Appeals], as against the NIL income returned by the appellant, on the facts and circumstances of the case. 10. The learned Commissioner of Income Tax [Appeals] is not justified in confirming the addition made by the learned assessing officer amounting to Rs. 68,66,77,426/- on account of alleged valuation of closing stock of sub-grade Iron Ore as undisclosed stock, on the facts and circumstances of the case. 11. The learned Commissioner of Income-tax [Appeals] is not justified in denying the benefit of a favourable judgement, owing to the fact that the appellant has not disclosed quantitative details in its tax audit, on the facts and circumstances of the case. 12. The learned Commissioner of Income-tax [Appeals] and the learned assessing officer were not justified in making additions on account of alleged valuation of closing stock of sub-grade Iron Ore as undisclosed stoc....
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...., pursuant to that, case of assessee was centralized and notice u/s. 153A of the Act was issued on 23.4.2020. Assessee reiterated the return at Rs. Nil on 7.9.2020 and consequent to that, notice u/s. 142(1) was issued on 19.2.2021 and notice u/s. 143(2) was issued on 29.9.2020. 5. During search, documents were found and seized as per Annexure 01 page 277 to 280 of Annexure 1 which contains 2 Mahazars dated 21.8.2017 and 5.1.2018 drawn by office of the Deputy Director of Department of Mines & Geology (DMG), Hospet where in stock of sub grade stock of iron ore lying at the B Block of the mines of assessee were quantified. As during 2011, mining of iron ore was banned in Karnataka, Hon'ble Supreme Court has set up a Monitoring Committee and directed to sell the iron ore lying at the various stock yards. 6. A statement u/s. 132(4) of the Managing Director of assessee was recorded, seized material was confronted, and explanation was asked about disclosure of the above stock. It was admitted by the MD that the subgrade stock is not disclosed in the books of account and offered to disclose the same as closing stock at value at the cost of production for AY 2018-19. This statement was re....
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....of production at our cost price of the same will be Rs. 622/-. Accordingly, the total value of the undisclosed stock is Rs. 308,745,250/-. In this regard I voluntarily agree to offer the amount of Rs. 308,745,250/- is the value of closing stock banned Hematite Quartz which would henceforth be added to the revised balance sheet of the company. Q. 20 please explain why the value of the stock of Rs. 308,745,250/- will not be considered as an income for the financial year 2017 - 18. Ans:- yes, as I agree earlier, I want to offer the same voluntarily as an income of the financial year 2017 - 18." 8. Assessee retracted the statement on 1.4.2019. The reason for retraction was that sub grade iron ore was considered as waste, same is not saleable, it is valued at lower of cost or net realizable value., net realizable value is nil, therefore, no Closing stock would be valued and therefore disclosure is incorrect. 9. The ld. AO issued notice u/s. 133(6) to the Office of the Dy. Director, DMG to verify the unsold stock from mining banned period to till date. Information was received and shared with the assessee. As per the information it was found that on 31/3/2012 the assessee was havin....
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.... and not at the market value. vi. Assessee has already valued the inventory as stated above and therefore addition cannot be made. 15. The ld. AO considered the mining ban in Karnataka and subsequent decision of the Hon'ble Supreme Court and held that information was received from the Dy. Director, DMG and if not for the mining ban and subsequent sale through the Monitoring Committee, the sale of sub grade iron ore would not be disclosed by the miner and thereby generating undisclosed income. He further held that quantity of 496375 MT of sub grade iron ore was determined as per Mahazar drawn by Dy. Director and same was accounted for stock in FY 2019-20 and sold at e-auction subsequently. He held that assessee has accounted for closing stock of such iron ore as Mahazar found and seized during the search proceedings. This proves that the assessee has not accounted for sub grade iron ore lying at its stock yard after the ban of mining. Hence the stock of sub grade iron ore is undisclosed. The ld. AO based on IBM reports, computed the quantitative details from AY 2013-14 to 2018-19 in para 12 of the assessment order. He found that assessee had sub grade iron ore of 1692672 MT as on....
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.... that sub grade iron ore was excavated in earlier years, it is not saleable, He therefore referred to the annual report para 16.1 wherein it is mentioned that the assessee has not maintained stock register and during the appellate proceedings it was also not produced, the information was gathered during the course of search. Now assessee cannot claim that the stock of sub grade iron ore in the financial statement is not shown because its value is Rs. Nil. He further stated that the MD of the assessee in a statement in search has arrived at a value of Rs. 622/- per MT and considering the same, the AO has made an addition of Rs. 68.62 crores. Therefore, addition made on the basis of statement made u/s. 132(4) of the Act is justified. Accordingly, he dismissed ground nos. 6 to 8 of the appeal. iii. He also rejected the retraction of the statement relying upon Accounting Standard 2. iv. Assessee also raised an issue that if the addition is to be made, the opening stock for the year is 16,92,672 MT, out of which 588689 MT is sold during the year and thereby resultant closing stock is 11,03,983 MT. Assessee has already recorded the sale value of 588,689 MT in the Profit & Loss accoun....
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....ferred to Q.No. 17 wherein page 277-280 of Annx. 1 is referred to. He also submitted that based on that paper in answer to Q.No. 18, the MD has disclosed the quantity of 496375 MT for AY 2017-18 as verified and found by the Dept. of Mines at the value of Rs. 622/- per MT, the disclosure was made of Rs. 30,87,45,250/-. This is evident from the Q.Nos. 19 & 20. Therefore, according to him, material was found for AY 2018-19 and not for AY 2013-14. 21. He submitted that Assessee has retracted the statement on 1.4.2019 by making submission to the Dy. Director of Income Tax, Bengaluru (Bengaluru). He referred to the notice u/s. 142(1) dated 19.2.2021 placed at page 87 onwards of the PB. He referred to para 2 and stated that based on Mahazar at pg. 277-280 for FY 2017-18, AO obtained further information during the course of assessment proceedings from DMG of the total quantity of sub grade iron ore as on the date of mining ban and at the end of each financial year. Based on such information received, the ld. AO found that as on 31.3.2012, the closing stock of SGROM was 1692672 MT and stock as on 31.3.2013 was 11,03,983 MT. For the year ended on 31.3.2013 there was sales of 568000 MT. Ther....
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....ddition could have been made during the year. 23. The ld. AR stated that the ld. AO has made addition on account of 1403983 MT of the material valued at Rs. 622/- per MT resulting into addition of Rs. 68.66 crores of quantitative details obtained from the mining department. He referred to page 276 of PB wherein the summary of inventory obtained from the Mining Dept. from AY 2009-10 till 2013-14 were obtained. He submits that in AY 2009-10 assessee was assessed in the hands of erstwhile partnership firm wherein identical issues arose and valuation of closing stock of sub grade dumps for that year was made and addition of Rs. 4,55,80,400/- was made. Rate of valuation was taken at Rs. 60/- per MT. He referred to the assessment order u/s. 143(3) dated 28.12.2011 for the AY 2009-10. The ld AO also valued the quantity of 1992860 MT taken in that AY and the chart placed at page 276 of PB. 24. He specifically referred to the order of the ld. CIT(A) and submitted that the ld. CIT(A) has not considered the ground of appeal in proper perspective that in absence of any incriminating material found during search for the relevant year, no addition could have been made. The ld. CIT(A) has held ....
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....mentioned in the tax audit report. She referred to para 6.7 of the appellate order and stated that the CIT(A) is perfectly justified in not granting credit to opening stock but confirming the addition of closing stock. 28. In the rejoinder, the ld. AR reiterated the submissions and stated that:- i. There is no incriminating material found during search for AY 2013-14 but only for AY 2018-19 and material was gathered by the ld. AO during the course of assessment proceedings by making an enquiry of material found for AY 2018-19 and made the addition in AY 2013-14 on the basis of opening and closing stock related to the business of assessee from AY 2009-10. ii. He further stated that the assessment order for AY 2009- 10 shows the quantity and there is no factual inaccuracy on the quantity of stock as well as the rate. Therefore, during the year, the addition is unwarranted. iii. He referred to the yearly reports of the quantitative details of the material to show that there is an excess opening stock than the quantity of closing stock. Therefore, no addition could have been made. iv. On the issue of not granting credit to opening stock while making addition of the closing sto....
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....closed stock of iron ore lying at the mines of assessee since mining was banned to till date. This information was called for under section 133 (6) of the Act. 36. In such details obtained during the course of assessment proceedings it was found that assessee has a closing stock of 11,03,983 metric ton of Subgrade Iron ore as at 31/03/2013. As such subgrade iron stock was not disclosed in the balance sheet, In the tax audit report, in the return of income, the learned assessing officer made the addition of the same Valuing it at the cost of production which is Rs. 622/- per metric ton, which is lower of cost or sale price of Rs 1280/- per metric ton. Accordingly, the addition of Rs 68,26,77,426/- was made to the total income of assessee as undisclosed stock for the assessment year. 37. The issue is whether the addition is made based on incriminating material found during the course of search or not. 38. The clear cut answer on looking at page number 5 of the assessment order, it shows that the assessing officer has obtained this information during the course of assessment proceedings by issuing notice under section 133 (6) of the Act. Thus, information is obtained by the assessi....
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....clear that there is no incriminating material found during the course of search for the impugn assessment year i.e. Ay 2013-14 and therefore, the addition made by the learned Assessing Officer is contrary to the provisions of Section 153A as well as the decision of the Honourable Supreme Court. Thus, we do not have any hesitation in holding that the addition made by the learned Assessing Officer is contrary to the provisions of the law and judicial precedents cited before us. 45. Arguments of the ld CIT DR does not appeal to us that though incriminating material [stock statement based on which disclosure u/s 132 (4) is made] is pertaining to AY 2017-18 but the stock statement obtained by the ld AO u/s 133 (6) of the act for other assessment years originates from that material and therefore such information should also be considered as incriminating material found during course of search. If such arguments are accepted then all material which are collected during assessment proceedings will become incriminating material. Such is not the mandate of the provision of the law and decision of Honourable Supreme Court in Abhisar Build well Ltd [Supra]. 46. Thus ground no. 7 of the appea....