The Hon’ble Mr. Justice Ravi v. Hosmani

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATEBD THIS THE 2 DAY OF SEPTEMBER, 2021 PRESENT THR HON’BLE MRS.JUSTICEK S.SUJATHA ANT) THE HON’BLE MR. JUSTICE RAVI V. HOSMANI I.T.A.No.49/2015 BETWEEN : SRI D.M.SANKAR|AGED ABOUT 46 YBARS|9/O SRI A.G.MUTHU SUBRAMANIPROP: M/S VINAYAGA MINERALSSHRBBHARINI NIVAS~ CROds»s, VIDYANAGARTUMKUR-57/7210VEKBRABHADRBEBESHWARA NIL% CROdsd»s, VIDYANAGARTUMKUR..APPRLLANT| (BY SMT.JINITA CHATTERJEE, ADV. |A/W. SRI S.PARTHASARATHI, ADV.) AND ; THE INCOME-TAX OFFICKRWARD-1, TUMKUR.| _. RESPONDENT. (BY SRI M.DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.) THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 27/06/2014 PASSED IN ITA NO.1321/BANG/2012, FOR:THR ASSBKBSSMEBNT YBAR 2JOO9S-2010 PRAYING THIS HONCOURT TO I. FORMULATE THE SUBSTANTIAL QUESTIONS OFLAW STATED ABOVE; II. ALLOW THE APPEAL AND SET ASIDE| THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA)NO.1321/BANG/2012—DATEHD2//06/2014.KOR,THEASSESSMENT YEAR JOO9S-2Z010 THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J©, DELIVERED THE FOLLOWING: JU DGMENT This appeal is filed by the assessee under Section260A of the Income Tax Act, 1961 |'Act’ for short]assailing the order of the Income Tax Appellate Tribunal “B” Bench, Bangalore [|‘Tribunal’ for short] dated27.06.2014 passed in ITA No.1321/Bang/2012 relatingto the Assessment Year 2009-10. oD The appeal was admitted by this Court toconsider the following substantial questions of law. — asWhether, the Tribunal was justifiedin upholding the estimate made by the assessingofficer while determining the income on miningactivitywhentheappellanthad.providedadequate explanation with evidence for theincrease in expenditure of re-screening charges inthe course of extraction of iron ore and also theover all gross profit increase and also compared - 3 -. with the production results of the succeedingyear? 11.Whether the Tribunal was justified indisturbing the profit when no defect in accountswas found and the accounts were audited andwhen the report under Section 44AB of the ActWasfurnishedandwhetherinsuchcircumstances the provisions of Section 145would apply to the case of the Appellant?” 3.|The assessee iS an individual, who iscarrying on the business of trading in Iron Ore onwholesale basis in the name and style of his proprietaryconcern. “M/s. Vinayaka Minerals”. The return ofincome for the year under consideration was originallyfiled by the assessee and subsequently it was revised.Since the extraction expenses claimed by the assesseeduring the year in question was substantially higherthan that of the immediately preceding year, theASSeSSIn¢gOfficer|disallowedthesaidextractionexpenses to certain extent on examining the material on record during the course of assessment proceedings,aiter recording the statement of the assessee as well. | 4Being aggrieved by the disallowance ofextraction/re-screeningCXPCIScsclaimed.bytheassessee to certain extent and allowing only to theextent of Rs.64,30,000/- calculated at Rs.200/- perM.T.,the.AaAsSSsSEpreferredappealbeforethe.CommissionerOT IncomeTax|Appeals|}.LearnedCommissioner of Income Tax |Appeals| restricted theaddition to Rs.23,00,000/- as against Rs.45,00,000/-—made by the Assessing Officer, thereby granted relief ofRs.22,00,000/- to the assessee. 5Being aggrieved by the said order of theCommissioner of Income Tax |Appeals], the Revenue aswell as the assessee both preferred appeals before theTribunal. The Tribunal passed a common. orderimpugned herein dismissing the appeal filed by the -5 -| assessee, partly allowing the appeal filed by theRevenue. 6. Being aggrieved by the same, the assesseehas preferred this appeal raising the substantialquestions of law as aforesaid. 5Being aggrieved by the said order of theCommissioner of Income Tax |Appeals], the Revenue aswell as the assessee both preferred appeals before theTribunal. The Tribunal passed a common. orderimpugned herein dismissing the appeal filed by the -5 -| assessee, partly allowing the appeal filed by theRevenue. 6. Being aggrieved by the same, the assesseehas preferred this appeal raising the substantialquestions of law as aforesaid. ToLearned.counsel]Smt.JinitaChatterjeeappearing for the assessee strongly contended that theTribunal has failed to appreciate the total cost ofpurchases which includes basic cost and cost of re-screening charges which cannot be considered inisolation since they are intrinsically related. TheAssessing Officer has considered Rs.200/- as cost ofre-screeningcharges.whereasthe.aSSECSSEEhadincurred Rs.325/- per M.T, since poor quality of ironore was purchased by the assessee during theAssessment year in question. It is obvious that to bringthe poor quality of iron ore to the standard quality,more extraction/re-screening expenses requires to be expended and accordingly, the same was claimed asexpenditures incurred. The authorities have failed toappreciate the same and determined the extraction /rescreening charges, comparing the same with theprevious year and subsequent year without anyscientific basis. It was further argued that theAssessingOfficerhas.notprovided|reasonable|opportunity for the assessee to cross-examine thepersons from whom the assessee had purchased theiron ore, besides collecting the statements of theassessee. Learned counsel would submit that the!Tribunal proceeded to dismiss the appeal filed by theassessee mainly on surmises and conjectures withoutexamining the invoices placed before it in a rightperspective. Thus, the learned counsel sought forallowingtheappealansweringthesubstantial questions of law in favour of the assessee. 8.|Learned counsel for the Revenue justifyingthe impugned order would submit that the Tribunal hasextensively analyzed and granted the relief to an extentof Rs.22,00,000/- without any basis. In the absence ofmaterial evidence placed on record to establish theactual expenses claimed as the incurred expenses, theAssessing Officer having applied his mind even to theaspect of the low quality of material said to have beenpurchased vis-a-vis the extraction expenses whichrequires to be incurred, has rightly determined suchexpenses at Rs.200/- per M.T., notwithstanding suchexpenses claimed at Rs.38/- in the assessment year2008-09 and Rs.39/- in the assessment year 2010-11.The same is based on the material evidence. The!Commissioner of Income Tax |Appeals| ought not havefurther granted the relief on imaginary basis. TheTribunal|havingexamined.theseaspects,|IVLOTparticularly, the invoices furnished by the assessee, hasgiven a finding that there is low quality materials as well as good quality material, both purchased by theassessee in the assessment year in question andaccordingly considering these aspects has_ rightlydismissed the appeal filed by the assessee allowing theappeal of the Revenue. Hence, prayed for dismissal ofthe appeal. QO We have carefully considered the rivalsubmissions of the learned counsel appearing for theparties and perused the material on record. 1Q.Adverting to the arguments advanced by thelearned counsel for the parties, we are of theconsidered opinion that there is some force in thearguments advanced by the learned counsel for theRevenue. No doubt, learned counsel for the appellant-assessee vehemently argued that the authorities havefailed to consider the invoices in a proper perspective,we are unable to subscribe to her submissions. I[t 1swell settled that the Tribunal being the last fact finding -9Q-) QO We have carefully considered the rivalsubmissions of the learned counsel appearing for theparties and perused the material on record. 1Q.Adverting to the arguments advanced by thelearned counsel for the parties, we are of theconsidered opinion that there is some force in thearguments advanced by the learned counsel for theRevenue. No doubt, learned counsel for the appellant-assessee vehemently argued that the authorities havefailed to consider the invoices in a proper perspective,we are unable to subscribe to her submissions. I[t 1swell settled that the Tribunal being the last fact finding -9Q-) authority, the finding recorded by the Tribunal withrespect to the quality of material l1.e., iron orepurchased by the assessee has some relevance. Thearguments now advanced by the learned counsel forthe assessee would not touch upon any question of lawmuch less the substantial questions of law to bedecidedby|thisCourt.On|thecontrary,thesubmissions would relate to the factual aspect of theexpenses incurred towards the extraction/re-screeningcharges of iron ore purchased in the assessment yearin question. 11.)At this juncture, it would be profitable toquote the finding of the Tribunal on this aspect, whichreads thus: “Even before us, the ld. Counsel for the|assessee has made an attempt to support thecase of the assessee by pointing out from someof the copies of invoices placed on record thatlower grade material was purchased by theassessee during the year under consideration. A perusal of the said invoices, however, shows|that higher grade material was also purchasedby|theaASSCSSCEduringtheyearunderconsideration and there was not much differencein the rates of the so-called low grade aterialand high grade material, as reflected in the saidinvoices. Moreover, the relevant quantitative|details are also not placed on record before us|by the ld. Counsel for the assessee to show that|the proportion of low grade material purchased|duringtheYea iunderconsideration|Wadasubstantially higher that of the immediatelypreceding and succeeding years. In any case,we find that the extraction/rescreening charges|were paid by the assessee @ Rs.38 and Rs.55m.t. in the A. Ys. 2008-09 & 2010-11 respectivelyand the AO already having allowed the claim ofthe assessee for such charges @ Rs.200 per m.t.,during the year under consideration, we are of|the view that even tf the various reasons|advanced by the assessee in support of its claimfor higher extraction/ rescreening charges are|assumed to be correct, the same are alreadycovered and taken care of by the fact that thehigher extraction/rescreening charges @ Rs.200per m.t., are allowed by the AO himself, as| compared to Rs.38 as claimed by the assesseehimself in the immediately preceding year. 13.|It 1s relevant to note here that mostof the adverse findings recorded by the AO whiledisallowing the claim of the assessee on accountof extraction/ rescreening charges to the extentof about Rs.45 lakhs were found to be correct bythe ld. CIT/A/, but she_ still restricted thedisallowance made by the AO on this issue toRs.235 lakhs, giving a relief of about Rs.22 lakhsto the assesse on this issue, without giving anycogent or convincing reasons and_ withoutappreciating the fact that the claim of theassessee for higher extraction/ rescreeningcharges was allowed by the AO by adopting therate of Rs.200 per m.t., as compared to the rateof Rs.38 per m.t., claimed by the assessee in theimmediately preceding year. 14.|As such, considering all the factsand circumstances of the case, we are of theview that the disallowance of Rs.45,05,867made by the AO on account of extraction/rescreening charges was fair and reasonableand the ld. ICT/[Appeals/ was not justified inrestricting the same to Rs.23 lakhs. We,therefore, modify the impugned order of the ld. ClT/Appeals} on this issue and confirm thedisallowance of Rs.45,05,867 made by the AOon account of extraction/ rescreening charges. 14.|As such, considering all the factsand circumstances of the case, we are of theview that the disallowance of Rs.45,05,867made by the AO on account of extraction/rescreening charges was fair and reasonableand the ld. ICT/[Appeals/ was not justified inrestricting the same to Rs.23 lakhs. We,therefore, modify the impugned order of the ld. ClT/Appeals} on this issue and confirm thedisallowance of Rs.45,05,867 made by the AOon account of extraction/ rescreening charges. 12.)Thus, it is clear that the attempt made bythe assessee to establish the lower grade of materialpurchased by the assessee required more extraction /rescreening charges was not supported by any materialevidence. The same being considered extensively by theTribunal, we do not find any ground to interfere withthe factual findings recorded by the Tribunal. Hence, wedismiss the appeal answering the substantial questionsof law, in favour of the revenue and against theaSSECSSFEC In the result, appeal stands dismissed. NC. Sd/-.JUDGE| Sd/-.JU DGE