TMI Blog2014 (9) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - AO has taken exports by NMDC during the year of ₹ 2517,21,27,295 - 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 of ₹ 2517,21,27,295 is set aside as it cannot be made on presumptions and hypothesis – Decided in favour of Assessee. Addition 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:- Following the decision in assessee’s own c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] and completely relying upon CIT Vs. Panyam Cements and Minerals Industries Ltd. [1996 (9) TMI 49 - ANDHRA PRADESH High Court] it has been held that 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:- Following the decision in assessee’s own case as decided in DCIT Versus M/s NMDC LTD [2014 (7) TMI 993 - ITAT HYDERABAD] - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e next being the addition of ₹ 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 ₹ 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 ₹ 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer has not followed the due procedure laid down by Supreme Court in the case cited supra. In this context, it 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iries caused including statements recorded from the Officers involved in export of iron ore before reopening assessment. As already pointed 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 reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MMTC 19.12.11 6. Sri Sunil Khurana, Director (Marketing) MMTC 20.12.11 11. On examination of the above officers, the Assessing Officer noticed that the exports by NMDC are stated to have been covered by long term and short term agreements. The long term agreement which normally covers a period of five years essentially contains the producewise quantities to be exported every year during the pendency of the long term contract. As far as the price is concerned, there is a specific provision in 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly, it was argued that the entire sales revenue generated from exports has been accounted by both the assessee and MMTC and submitted that the commercial prudence of the Assessing Officer based on spot prices, can only indict the commercial judgment of the esteemed team of government Officials responsible for fixation of prices but cannot challenge the correctness of the amounts nor the flow of transactions which are entirely transparent and have been upheld to be true and fair by the Government and statutory auditors. Accordingly, the assessee requested to reject the contentions of the Assessing Officer 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 prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otiated. A.O. also acknowledges the receipt of the communication from the Under Secretary, Government of India of the various Cabinet notes and the approval of prices including the agreements entered by the parties. These cannot be brushed aside. 20. More over, similar issue was considered by the Coordinate Bench in the case of Mysore Minerals Ltd. vs. ACIT ITA.No.351/Bang./2011 for A.Y. 2005-06. On similar additions made by A.O. therein, the Hon ble ITAT vide its order dated 2nd November, 2012 held as under : 18.4 We have heard both parties and carefully perused and considered the material on record. We find 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by revenue are accordingly dismissed . 21. We agree with the above findings of the Coordinate Bench given in similar circumstances. In fact, assessee s case is much better than the above case as the facts in that case are that assessee entered into agreement with a private company whereas this assessee has entered into long term contract with foreign buyers which were duly negotiated and finally approved by Government of India. We, therefore, find no reason to confirm the addition of the above 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next effective ground of the assessee in this appeal relates to addition of ₹ 15,38,26,817 made by the Assessing Officer and sustained by the CIT(A) on account of mine closure obligation. 20. 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. Being so, the CIT(A) directed the AO to ascertain the account of year-wise mining, which has been done from the remaining mines and allow mine closure obligation to the extent mining done corresponding to the current year. He further gave a direction to the AO if the assessee fails to provide such data, then, pro rata has to be applied. Thus, the CIT(A) has given a categorical finding in paras 4.3 4.4 of his order. Therefore, we do not find any infirmity on that part of the order and accordingly, we confirm the same. This ground raised by the assessee is dismissed . Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide paras 47 and 48 of its order 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. Similar came up for consideration before the coordinate bench of ITAT, Cuttack in case East India Minerals Ltd. Vs. JCIT in ITA No. 224/CTK/2012, vide its order dated 25/06/2012, on which reliance placed by the assessee, wherein it has been held as follows: 7. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we uphold the contention of the learned Counsel for the assessee for the simple reason that the denial of claim of depreciation has been made on misinterpretation of law and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 28 and 28.1 to 28.3 of the order dated 28.2.2014 for assessment year 2008-09, cited supra, decided the issue in the following manner- 28. We have heard the arguments of both the 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 leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if the expenditure incurred by the assessee for first time with respect to the assets claimed as capital asset, in earlier paras of this order on which we have granted depreciation, then, this expenditure to be considered as capital expenditure. Thus, this ground is partly allowed . Following the above decision of the Tribunal dated 28.2.2014, coordinate bench of this Tribunal, vide paras 38 and 39 of its order dated 9.5.2014 for the assessment year 2010-11 in ITA No.1795/Hyd/2013, decided this issue in identical manner, and partly allowed the grounds of the assessee on this aspect. In this view of the matter, following the consistent view taken by the Tribunal in assessee s own cases for other years noted above, though we uphold the disallowance 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 ₹ 33,30,05,797 made by the Assessing Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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. This contribution would definitely go a long way in conducting the assessee s mining business in a profitable manner. When the assessee is having a mining unit in a remote corner of the country, the cooperation of the villagers is very much required for conducting the business. More particularly, the cooperation of the people who are affected by the mining operation of the assessee is required. Merely because the hospital and medical college are situated 16 kms away from the unit, that will not deter the medical institution in giving treatment to the affected people. Moreover, admission was given to the 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 ₹ 5,00,00,000 has to be treated as revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s capital expenditure by the auditors. It is only at the time of computation of income the assessee claimed the expenditure as revenue without providing any details or reasons. Even before us also, the assessee has not placed any evidence to establish the expenditure incurred as revenue expenditure. Therefore, we do not find any infirmity in the order of the CIT(A) in confirming the addition of ₹ 5,43,27,455/- on account of preoperative expenses and the order of the CIT(A) is hereby confirmed. . Facts and circumstances of the case in the year under appeal being identical to those considered by the Tribunal for the assessment year 2008-09, and in the absence of any decision to the contrary brought to our notice by the learned counsel for the assessee, we find no infirmity in the impugned order of the CIT(A) for this year as well. We accordingly uphold the addition of ₹ 4,69,41,696 made by the Assessing Officer and sustained by the CIT(A) towards disallowance of assessee s claim for deduction in respect of preoperative expense. Consequently, assessee s grounds on this issue are rejected. 30. In the result, assessee s appeal for assessment year 2009-10, being ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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