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2021 (10) TMI 659 - AT - Income TaxDeemed income - accrual of income - year of accounting of e-auction sale - unaccounted sale proceeds of E-Auctioned Iron ore by Monitoring Committee - HELD THAT - As per case M/S VEERABHADRAPPA SANGAPPA CO. VERSUS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, BELLARY. 2020 (12) TMI 1145 - ITAT BANGALORE it is very necessary to examine, whether the quantity of goods sold was identified on the date of e-auction, and whether sale proceeds to be received during the assessment year under consideration are quantified by the M.C. If these two ingredients were verifiable on the date of e-auction, then only the assessee is required to recognize the income as deemed income accrued in the assessment year under consideration. Otherwise, the assessee is not required to recognize income in the assessment year under consideration. CIT(Appeals) has not examined these two ingredients. With these observations, we set aside the order of CIT(Appeals) and remit the issue back to the file of the Assessing Officer to examine these two ingredients and decide the issue afresh in the light of the above order of the Tribunal. Revenue's appeal is partly allowed for statistical purposes.
Issues Involved:
1. Whether the CIT(A) erred in not appreciating that the entire amount of ?12,83,60,000/- should be considered as sales during FY 2013-14. 2. Whether the CIT(A) incorrectly relied on the ITAT decision in the case of M/s. M Hanumantha Rao. 3. Whether the addition of ?10,91,75,982 as unaccounted sale proceeds of E-auctioned iron ore was justified. Issue-wise Detailed Analysis: 1. Consideration of Entire Sales Amount in FY 2013-14: The primary issue was whether the CIT(A) failed to appreciate that the entire amount of ?12,83,60,000/- should be considered as sales during FY 2013-14. The revenue contended that the amounts became receivable by the assessee as per the e-auction conducted by MC/CEC, and thus, the entire amount should be recognized as sales in FY 2013-14. However, the assessee argued that the sales were accounted for in the subsequent AY 2015-16, as the income accrued only when the Monitoring Committee communicated the entitlements after the conclusion of the transaction of sale. The CIT(A) allowed the assessee's appeal, following the ITAT decision in the case of M/s. M. Hanumantha Rao, which dealt with a similar issue of the year of accounting for e-auction sales. 2. Reliance on ITAT Decision in M/s. M Hanumantha Rao: The revenue argued that the CIT(A) erred in relying on the ITAT decision in the case of M/s. M Hanumantha Rao, where the facts were not correctly considered. The revenue highlighted that M/s. M Hanumantha Rao had offered such receipts for taxation on an accrual basis by filing a revised return of income for AY 2012-13. The CIT(A), however, found the facts and circumstances of the present case to be similar to those in the M/s. M. Hanumantha Rao case and therefore, relied on the ITAT decision to delete the addition of ?10,91,75,982. 3. Addition of ?10,91,75,982 as Unaccounted Sale Proceeds: The AO added ?10,91,75,982 as unaccounted sale proceeds of E-auctioned iron ore, arguing that the income had accrued in the subject assessment year itself and could not be deferred to AY 2015-16. The assessee contested this addition, providing evidence that the sales and lifting of the entire quantity were completed during April and May 2014 (AY 2015-16). The CIT(A) allowed the appeal, considering it a covered case in favor of the assessee based on the ITAT order in the case of M/s. M. Hanumantha Rao. The Tribunal examined the facts and found that the issue revolved around whether the quantity of goods sold was identified on the date of e-auction and whether the sale proceeds were quantified by the Monitoring Committee during the assessment year under consideration. The Tribunal noted that if these two conditions were met, the income should be recognized in the assessment year under consideration. However, since the CIT(A) did not examine these conditions, the Tribunal set aside the CIT(A)'s order and remitted the issue back to the AO for fresh examination. Conclusion: The Tribunal directed the AO to examine whether the quantity of goods sold was identified on the date of e-auction and whether the sale proceeds were quantified by the Monitoring Committee during the assessment year under consideration. If these conditions were met, the income should be recognized in the assessment year under consideration. The revenue's appeal was partly allowed for statistical purposes.
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