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2014 (7) TMI 993 - AT - Income TaxReopening of assessment – No tangible material to suggest escapement of income – Held that:- AO has got the reports from the news papers and then AO 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 - AO has prima facie belief to reopen the assessment u/s 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 - there is prima facie belief for reopening the assessment – it cannot be held that AO has no reason to believe at the time of reopening the proceedings – Decided against assessee. Addition on suppression of sale – Held that:- AO has taken exports by NMDC during the year at ₹ 726,39,88,999/- whereas in table at page 38 while making the addition, the sale value of export declared by NMDC was taken at ₹ 469,55,65,037 - Relying upon Mysore Minerals Ltd. vs. ACIT [2013 (9) TMI 676 - ITAT BANGALORE] – there was no reason to confirm the addition of the 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 - 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 – Decided in favour of Assessee. Additional depreciation on machinery – Held that:- CIT(A) wrongly confirmed the addition made by the AO holding that exploration and sale of iron ore does not involve activity of production of any article or thing, ignoring the fact that assessee do extract the iron ore and sell the iron ore after various processes – Relying upon Commissioner of Income-Tax Versus Sesa Goa Ltd. [2004 (11) TMI 14 - SUPREME Court] - extraction and processing of iron ore amounts to production - activity of winning or extracting the coal from the mines can be aptly described as production activity - on both principles of law and also on fact that assessee was allowed the additional depreciation in all other years, there was no reason to confirm the order of the CIT(A) – Decided in favour of Assessee. Disallowance u/s 40(a)(ia) – Non-deduction of tax on commission paid to MMTC – Held that:- There was no reason to interfere with the order of the CIT(A) - since the assessee is not entitled to export directly and export by the MMTC was on principal basis, there can be no commission payment to MMTC, as such the question of sustaining the order of the AO in estimating the commission and disallowing the same u/s 40(a)(ia) does not arise - there is no claim of commission by assessee - Decided against Revenue. Addition of stamp duty and registration charges – Capital in nature or not – Held that:- Following the decision in CIT Vs. Panyam Cements and Minerals Industries Ltd. [1996 (9) TMI 49 - ANDHRA PRADESH High Court] - stamp duty paid for renewal of mining lease is a revenue expenditure - if the expenditure incurred by the assessee for first time with respect to the assets claimed as capital asset - the AO is correct in treating the amounts as capital in nature - expenditure incurred by the assessee for the first time with respect to the assets claimed as capital asset, depreciation has to be granted and then this expenditure is also to be considered as capital eligible for depreciation – Decided partly in favour of Assessee. Claim on corporate social responsibility – Expenses incurred wholly and exclusively for the purpose of business – Held that:- The contribution is only a welfare measure for the upliftment of the Adivasis in the locality where the mining unit was situated and also for the welfare of the employees of the assessee - Following the decision in NMDC Ltd. Hyderabad Versus Joint Commissioner of Income-tax [2014 (3) TMI 682 - ITAT HYDERABAD] - This contribution would definitely go a long way in conducting the assessee's mining business in a profitable manner - indirectly all 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 – thus, the contribution has to be treated as revenue expenditure for the purpose of the business – thus, there is no justification in disallowing the amount – Decided in favour of Assessee. Disallowance of mine closure obligation – Expenses accrued bases on the quantity extracted - Whether the CIT(A) has erred in disallowing the mine closure obligation to the extent relating to the project under construction or not having any production during the year – Held that:- Mine closure obligation is not a contingent liability but ascertain liability - 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 - Following the decision in NMDC Ltd. Hyderabad Versus Joint Commissioner of Income-tax [2014 (3) TMI 682 - ITAT HYDERABAD] - If the assessee has made the claim on mines which have not started operations, the same cannot be allowed - ascertainability of liability is to be ascertained year-wise - the assessee is directed to furnish the relevant data to the AO towards the mines closure obligation and A.O. is directed to verify and allow the amount accordingly – Decided in favour of Revenue.
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