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2014 (11) TMI 230 - AT - Income TaxRe-computation of turnover - Confirmation of the part of sale price in excess of what is raised by the assessee in the Debit Note Held that - As decided in assessee s own case for the earlier assessment year, it has been held that the Karnataka Lok Ayukta, in its report on mining scam had alleged mal practices on the part of the officials of the assessee-company which is a Government of Karnataka undertaking and inquiries were initiated against the relevant officials - no evidence whatsoever has been brought on record by the AO to establish that the assessee has realized from the sale of C-ore to M/s. Kalyani Steels Ltd., more than what is recorded in the assessee s books of account - MMTC price was ₹ 1058 PMT prevailing on 1st April 2007 for supplies to be made during the FY 2007-08 which is in conformity with the marketing agreement and accordingly the assessee company had raised Debit Note for the same whereas M/s.Kalyani Steels Ltd., had offered sales price at ₹ 635/- PMT and after negotiations the sale price was fixed at ₹ 700/- PMT without prejudice to the award by the Arbitrator - The assessee has to offer the balance of sale consideration in the year of arbitration award - What is contemplated to be taxed under the Income-tax Act is the real income and unless income due to the assessee has been crystallized, it cannot be brought to tax on an estimate basis - the assessee has received only ₹ 700/- PMT from M/s.Kalyani Steels Ltd. thus, the actual price received by the assessee only shall be treated as income of the assessee during the relevant AY as the assessee has to offer difference of price charged on the final price arrived at by the Arbitrator in the year of award Decided in favour of assessee. Sales made to M/s.Shivashankar Minerals Held that - The agreements between the assessee and M/s.Kalyani Steels Ltd., and also M/s.Shivashankar Minerals, are similar and the fixation of price of ore was also governed by similar set of facts - the actual price received by the assessee only is to be brought to tax. Addition on valuation of closing stock Held that - There is no finding by any of the authorities on this contention and this contention needs verification by the AO thus, the matter is remitted back to the AO for fresh consideration Decided in favour of assessee.
Issues Involved:
1. Determination of the fair market price for sales to M/s. Kalyani Steels Ltd. 2. Determination of the fair market price for sales to M/s. Shivashankar Minerals. 3. Valuation of closing stock for the assessment year 2008-09. Issue-wise Detailed Analysis: 1. Determination of the fair market price for sales to M/s. Kalyani Steels Ltd.: The assessee-company, engaged in mining and extraction of minerals, metals, and granites, filed its income tax return which was scrutinized under section 143(3) of the Income-tax Act, 1961. During the assessment for the year 2008-09, the Assessing Officer (AO) noted a discrepancy in the sales price of iron ore to M/s. Kalyani Steels Ltd. The AO observed that the company sold iron ore at Rs. 700 per metric ton (MT) while the market rate was Rs. 1250 per MT. The AO deemed the difference as suppressed sales and taxed the differential price of Rs. 550 per MT. The CIT(A) provided partial relief by directing the AO to adopt a price of Rs. 1057 per MT, based on initial invoices raised by the assessee before a Board Resolution reduced it to Rs. 700 per MT. Both the assessee and the Revenue appealed against this decision. The Tribunal referred to its decision in the assessee's case for earlier years (2004-05 to 2006-07), where it was held that the income tax should tax real income, not hypothetical income. The Tribunal found no evidence that the assessee realized more than Rs. 700 per MT from M/s. Kalyani Steels Ltd. and concluded that the actual price received should be treated as income. Thus, the Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal. 2. Determination of the fair market price for sales to M/s. Shivashankar Minerals: For the assessment year 2008-09, the AO noted that the assessee sold ore to M/s. Shivashankar Minerals at Rs. 231 per MT against the MMTC rate of Rs. 1250 per MT. Similar to the case with M/s. Kalyani Steels Ltd., the AO made an addition for the price difference, and the CIT(A) provided partial relief. The Tribunal found that the agreements and pricing mechanisms with M/s. Shivashankar Minerals were similar to those with M/s. Kalyani Steels Ltd. Following the same logic, the Tribunal held that only the actual price received by the assessee should be taxed. 3. Valuation of closing stock for the assessment year 2008-09: During the assessment proceedings, the AO found that the assessee had closing stock of iron ore but had not recorded it in the books of account. The AO valued this stock at Rs. 25 per MT, arriving at a closing stock value of Rs. 27,50,000, and brought it to tax. The CIT(A) confirmed the AO's order. However, the assessee contended that the stock had been sold through tenders, and only delivery was pending, thus the stock did not belong to the assessee. The Tribunal noted that this contention required verification and remitted the issue back to the AO for de novo consideration, directing the AO to verify the assessee's claim and provide a fair hearing. Conclusion: In summary, the Tribunal allowed the assessee's appeals regarding the sales to M/s. Kalyani Steels Ltd. and M/s. Shivashankar Minerals, holding that only the actual price received should be taxed. The Tribunal also remitted the issue of closing stock valuation back to the AO for further verification. The Revenue's appeals were dismissed.
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