2017 (9) TMI 1960 - AT - Income Tax

Excess stock of iron ore - Investment in excess stock - unexplained investment - survey under section 133A - valuer has made a professional survey of the stock of iron ore at the mines of the assessee and submitted valuation report on 18.03.2008 - HELD THAT - Since the excess stock of iron ore was found, the onus is upon the assessee to explain the source of the expenditure incurred in mining such excess ore. The valuation of excess ore was done by the valuer and the same was also confronted to the assessee and the assessee has not disputed the method of valuation done by the valuer while offering the additional income on 31.03.2008. It is not the case where the income was offered or surrendered by the assessee under duress or pressure. Search was conducted on 07.03.2007 and additional income was offered through statement on 31.03.2008. Even after making statement, the assessee did not come forward to retract the statement on a plea that the statement was recorded under duress or in pressure. The retraction statement comes through letter dated 10.09.2009, almost after a year. Therefore it cannot be said that retraction is valid and there is no value of the statement recorded by the Revenue authorities. Moreover, sufficient opportunity was given to the assessee during the course of assessment proceedings to explain the source of expenditure incurred in extracting the ore but no satisfactory explanations were furnished by the assessee. He simply made a general/legal objections which were duly dealt with by the AO. Valuation of excess stock was done properly and the assessee was suppose to explain the source of expenditure incurred in mining the said ore and when he failed to do so, the AO has rightly made the additions on account of unexplained investment, which were latter confirmed by the CIT(A). We therefore find no merit in the assessee s appeal.

Summary

Issues Involved:

1. Legality of the assessment order under section 143(3) vs. section 144.
2. Disallowance of returned net loss and assessment of total income.
3. Addition of unexplained investment in raising iron ore.
4. Validity of statements recorded under section 132(4) and 131(A).
5. Application of principles of estoppel in tax proceedings.
6. Reference to the valuation officer under section 142(2A).
7. Deduction of admitted cost as per books.
8. Excessiveness of valuation adopted by authorities.
9. Levy of interest under sections 234A, 234B, and 234C.

Detailed Analysis:

1. Legality of the Assessment Order:
The assessee argued that the assessment should have been framed under section 144 after rejecting the books of accounts. However, the Tribunal found that the assessment was correctly framed under section 143(3) based on available materials, as the books of accounts were not rejected. Hence, the additional ground was not admitted.

2. Disallowance of Returned Net Loss and Assessment of Total Income:
The assessee's premises were searched, revealing excess stock. The assessee initially offered an additional income of ?7,00,00,000, which was later revised to ?11,10,01,980 based on a valuer's report. Despite this, the assessee did not disclose the additional income in subsequent tax returns. The AO assessed the total income at ?8,55,52,040, disallowing the returned loss of ?1,05,57,700. The Tribunal upheld this assessment, noting the assessee's failure to reconcile the excess stock with the books of accounts.

3. Addition of Unexplained Investment in Raising Iron Ore:
The Tribunal found that the excess stock of iron ore was valued by a registered valuer, and the assessee agreed to this valuation during the statement recorded on 31.03.2008. The assessee later retracted this statement but failed to provide satisfactory explanations or alternative valuations. Thus, the addition of ?11,10,01,980 as unexplained investment was justified.

4. Validity of Statements Recorded Under Section 132(4) and 131(A):
The Tribunal noted that the assessee's statements, admitting to the excess stock and the corresponding valuation, were not retracted immediately but only after a significant delay. The retraction was not considered valid, and the statements were deemed binding for the assessment.

5. Application of Principles of Estoppel in Tax Proceedings:
The Tribunal dismissed the assessee's argument that principles of estoppel do not apply to tax proceedings. The initial admission of additional income and subsequent failure to provide contrary evidence upheld the AO's findings.

6. Reference to the Valuation Officer Under Section 142(2A):
The assessee challenged the reference to the valuation officer, but the Tribunal found that the valuation was conducted professionally and in accordance with the law. The valuation report was used appropriately to assess the unexplained investment.

7. Deduction of Admitted Cost as Per Books:
The Tribunal found no merit in the assessee's claim for deduction of ?5,96,74,794 as per the books while determining the cost of extraction. The assessee failed to substantiate this claim with proper evidence.

8. Excessiveness of Valuation Adopted by Authorities:
The Tribunal upheld the valuation adopted by the authorities, noting that the assessee did not provide any alternative valuation or evidence to counter the valuer's report.

9. Levy of Interest Under Sections 234A, 234B, and 234C:
The Tribunal noted that the levy of interest under these sections is consequential and did not require independent adjudication. The interest was upheld as per the assessment.

Conclusion:
The Tribunal dismissed the appeal, confirming the assessment order of the CIT(A) and upholding the additions and interest levied by the AO. The assessee's various grounds and additional grounds were found without merit. The judgment was pronounced on 22nd September 2017.