Principal Commissioner Of Incometax, Central-I, Kolkata v. M/S. Rungta Mines Ltd

ITAT/303/2018 IA No.GA/2/2018 (Old No.GA/3264/2018) IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOMETAX, CENTRAL-I, KOLKATA. -Versus- M/S. RUNGTA MINES LTD. Appearance:Mr. Tilak Mitra, Adv....for the appellant. Mr. Subash Agarwal, Adv....for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, is directed against the orderdated 9[th] March, 2018 passed by the Income Tax Appellate Tribunal,“A” Bench, Kolkata (the Tribunal) in IT(SS)A Nos.30 to 33/Kol/2015for the assessment years 2007-08 to 2010-11. The revenue has raised the following substantial questions of law for consideration: i) Whether on the facts and in the circumstances of the casethe learned Tribunal was justified in law to confirm thedecision of the CIT(A) in respect of deleting the addition made by the Assessing Officer on account of suppressedsales ignoring the fact that the same was added on thebasis of computation of suppressed production andcorresponding value as per the finding of the Sales TaxAuthorities.sales ignoring the fact that the same was added on thebasis of computation of suppressed production andcorresponding value as per the finding of the Sales TaxAuthorities. ii) Whether on the facts and in the circumstances of the casethe Learned Tribunal was justified in law in dismissing theappeal of the revenue on the ground that Assessing Officermade additions without bringing any indirect circumstantialevidences on record ignoring the fact that the AssessingOfficer arrived at a finding based on the estimation on theopinion of Dean of NIT.the Learned Tribunal was justified in law in dismissing theappeal of the revenue on the ground that Assessing Officermade additions without bringing any indirect circumstantialevidences on record ignoring the fact that the AssessingOfficer arrived at a finding based on the estimation on theopinion of Dean of NIT. iii) Whether in the fact and circumstances of the case and inlaw, the Hon’ble Tribunal has erred in deleting theaddition on the basis that rejection of books of accountu/s 145(3) was not discussed in the assessment orderwhereas it is clear by the assessment order that whilemaking addition on account of suppression in production andsales thereof, the books of accounts submitted by assesseewere not accepted by assessing officer which implies thatbooks of accounts were rejected.”law, the Hon’ble Tribunal has erred in deleting theaddition on the basis that rejection of books of accountu/s 145(3) was not discussed in the assessment orderwhereas it is clear by the assessment order that whilemaking addition on account of suppression in production andsales thereof, the books of accounts submitted by assesseewere not accepted by assessing officer which implies thatbooks of accounts were rejected.” We have heard Mr. Tilak Mitra, learned standing counselfor the appellant/revenue and Mr. Subash Agarwal, learned Advocatefor the respondent/assessee. After elaborately hearing the learned Advocates appearingfor the parties and carefully perusing the materials placed onrecord, we are of the clear view that the entire matter isfactual. The question before the assessing officer was withregard to the iron content in the ore which is mentioned as Fecontent in the ore. Based on an estimation the assessing officer came to the conclusion that there was suppression of sales. Onappeal, the Commissioner of Income (Appeals)-20, Kolkata madeelaborate exercise and by order dated 12[th] December, 2014 allowedthe assessee’s appeal. The revenue challenged the same before thetribunal. The tribunal on its part, re-examined the factualposition. At this stage, the following paragraph of the orderpassed by the tribunal would be relevant: After elaborately hearing the learned Advocates appearingfor the parties and carefully perusing the materials placed onrecord, we are of the clear view that the entire matter isfactual. The question before the assessing officer was withregard to the iron content in the ore which is mentioned as Fecontent in the ore. Based on an estimation the assessing officer came to the conclusion that there was suppression of sales. Onappeal, the Commissioner of Income (Appeals)-20, Kolkata madeelaborate exercise and by order dated 12[th] December, 2014 allowedthe assessee’s appeal. The revenue challenged the same before thetribunal. The tribunal on its part, re-examined the factualposition. At this stage, the following paragraph of the orderpassed by the tribunal would be relevant: “21. From a perusal of the aforesaid opinion givenby the Dean of NIT, we note that it is a generalopinion and not anopinion rendered after analysing thesample iron ore used in Karakolha sponge iron plant.From a perusal of the opinion it is understood that theDean of NIT acknowledges the fact that no direct datais available in any reference book dealing with DRI(Direct reduce of iron) on raw material consumptionpattern. Secondly he acknowledges the fact that theyield ratio vary from plant to plant depending oncomposition of quality of raw material and theoperating conditions. The dean of NIT has admitted thathis technical opinion is based on his knowledge andgeneral discussion with some producers. With theaforesaid background the Dean of NIT has opined thatthe average requirement of raw material i.e. iron ore –1.5 tons when Fe content in the ore is 65% to produce aton of sponge iron, under average Indian conditions.. . .. . . It has been categorically stated by theDean of NIT that the consumption of iron ore per ton ofsponge iron will be more than 1.5 MT if the FE contentin the iron ore was less than 65%, This particular technical information of the Dean, NIT clearly comes inaid of the assessee company which has been able toplace on record the Laboratory Report of the iron orewhich was used in its Karakolha sponge factory. The labresults show the Fe content of iron ore used in itsKarakolha plant were between 62.795 and 63.23% from2006 to 2009 (up to July). Therefore, we note that theLd. CIT (A) has clearly analysed the letter of Dean,NIT and has come to a finding that reliance by the AOblindly of the Dean, NIT’s report is erroneous, whichwe concur. * * * * * * * * *29. To sum up finally, we note that there can be nouniversal and uniformly acceptable standard forconsumption of iron ore for production of sponge iron.It has to be appreciated that the various other factorslike quality, composition of raw materials, operatingconditions etc which contribute to the yield ratio.From the discussions stated above, we note that theyield ratio can vary from plant to plant and evendiffer from year to year based on the capacity of theplant, the efficiency of the staff, maintenance of theplant, electricity consumption etc. The Fe content ofthe iron ore also varies from geographical location ofmine to mine, season to season etc. So, there cannot beany universal and uniformly acceptable standard forconsumption of iron ore. The Fe content in an iron oreis a scientific fact and which can be determined byscientific test conducted at Laboratory equipped forfinding that. However, in the instant case, the AOfailed to collect samples of the iron ore during searchconducted on 06.02.2012 (even the sales tax official who raided on 18.08.2009 failed to do so) and sent itfor examination at a laboratory to find out the Fecontent of the iron ore utilized at its Larakolha plantat Orissa, thus making the estimation of excessproduction based on imaginary figures without anyscientific base. The AO in this case has blindly basedhis estimation on the opinion of the Dean of NIT.” who raided on 18.08.2009 failed to do so) and sent itfor examination at a laboratory to find out the Fecontent of the iron ore utilized at its Larakolha plantat Orissa, thus making the estimation of excessproduction based on imaginary figures without anyscientific base. The AO in this case has blindly basedhis estimation on the opinion of the Dean of NIT.” The above finding rendered by the tribunal was after re-appreciating the factual position. The undisputed case is thatthe report given by Dean, NIT was not based on any sample whichhave been brought, but based on the generalised information. Thishas been admitted and taken note by the CIT(A) as well as thetribunal.Thus, we are of the view that no question of law muchless substantial question of law arises for consideration in thisappeal.Accordingly, the appeal filed by the revenue(ITAT/303/2018) fails and is dismissed. Consequently, the connected application for stay (IANo.GA/2/2018) also stands closed. (HIRANMAY BHATTACHARYYA, J.) S.Das/As.