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2023 (1) TMI 715 - AT - Income TaxRevision u/s 263 by CIT - Nature of expenditure - expenditure in respect of the NPV - Revenue or Capital expenditure - Net Present Value (NPV) being the charges paid by the assessee to the Government for restoration mining area to its original status was liable to be treated as capital expenditure as revenue expenditure - HELD THAT - There is a categorical finding of the coordinate bench of this Tribunal 2012 (5) TMI 862 - ITAT CUTTACK that the said expenditure is liable to be treated as revenue expenditure - clearly the expenditure in respect of the NPV can be treated only as revenue expenditure. Consequently the revisionary proceedings initiated by the ld. Pr.CIT on this issue is unsustainable and therefore the same is quashed. Difference in the valuation of the iron ore as per the Form H1 and as shown in the return filed by the assessee - Here what evident is that it is in respect of the valuation of the fines that is being proposed to be revised. There is no difference in the quantity or quality of the iron ore fines. It is an admitted fact that the figures more so the valuation as per the Form H1 is as at the mine head being the Ex-Mine Prices of the Fines/Ore. The turnover as disclosed in the return can in no way be compared with the Form H1 price. If admittedly there was a difference in the quantification of the stock then there was case of revision but that is not so in the impugned assessment year. This being so as the method of accounting followed by the assessee is identical for the earlier assessment years in view of the principle of consistency we are of the view that the revisionary proceedings on this issue is unsustainable and consequently the same is hereby quashed. Inclusion of the value of the closing stock in the computation of the assessee - Admittedly the adjustment to the closing stock for the relevant assessment year would require the identical adjustment in respect of the opening stock in the relevant assessment year also. CIT has not given such direction. The Tribunal is not competent to include an issue which has not been considered by the CIT in the revisionary proceedings. The ld. Pr.CIT has only directed for closing stock to be adjusted. This admittedly is not admissible in any case. The adjustment of the closing stock would only result in the shifting of the profits of the subsequent years to the current year and the rate of tax is the same. There is also no direction nor any method by which the accounts of the subsequent year can now be adjusted when the time limit of the same has also expired. This is not a case where the income has escaped assessment. This being so the direction of the CIT in respect of the revision of this issue is found to be unsustainable and therefore the same is quashed. Opening and closing stock of the same figure - This issue of opening and closing stock of Rs.5.69 crores as appearing in the accounts of the assessee was due to the case of the judgment of the Arbitration Tribunal and the stock has been carried forward since 2009 and the same has not been sold out. The assessee has not got the required clearance from the mining authority to sell the same due to some technical issues. This submission of the assessee has not been dislodged by the ld. Pr.CIT. This issue is an issue coming from the earlier assessment years. Admittedly for the relevant assessment year this issue is nothing but an issue of opening balance. Consequently we are of the view that this issue is not an issue which can be considered for revision u/s.263 of the Act for the impugned assessment year. Consequently the revisionary proceedings initiated by the ld.Pr.CIT on this issue stand quashed. In view of the above the impugned order passed by the ld. Pr.CIT u/s.263 of the Act is hereby quashed. Appeal of the assessee stands allowed.
Issues Involved:
1. Treatment of Net Present Value (NPV) charges. 2. Difference in valuation of ores between Form H1 and profit and loss account. 3. Inclusion of closing stock value in the computation. 4. Consistency of opening and closing stock figures. Issue-wise Detailed Analysis: 1. Treatment of Net Present Value (NPV) charges: The assessee contended that NPV charges paid for restoring the mining area should be treated as revenue expenditure. The assessee referenced a previous decision by the ITAT Cuttack Bench, which had ruled in favor of treating such expenses as revenue in nature. The Tribunal reaffirmed this position, noting that the issue had been settled by the Hon'ble Supreme Court, which held that NPV charges are for environmental protection and not related to proprietary rights. Consequently, the revisionary proceedings initiated by the Pr.CIT on this issue were deemed unsustainable and quashed. 2. Difference in valuation of ores between Form H1 and profit and loss account: The Pr.CIT proposed revising the assessment due to a discrepancy between the valuation of ores in Form H1 and the profit and loss account. The assessee argued that this issue had been addressed in the assessment year 2014-2015, where the AO had accepted the reconciliation provided by the assessee. The Tribunal noted that the method of accounting followed by the assessee was consistent and that the Pr.CIT had not provided any evidence to counter the assessee's reconciliation. Therefore, the Tribunal quashed the revisionary proceedings on this issue, citing the principle of consistency. 3. Inclusion of closing stock value in the computation: The Pr.CIT directed the inclusion of the closing stock value in the computation, which the assessee argued would require a corresponding adjustment to the opening stock. The Tribunal agreed that such an adjustment would merely shift profits between years without affecting the overall tax liability, given the consistent tax rate. The Tribunal found that the Pr.CIT had not directed the necessary adjustments to the opening stock, making the revisionary proceedings on this issue unsustainable. Consequently, the Tribunal quashed the revisionary proceedings on this issue. 4. Consistency of opening and closing stock figures: The Pr.CIT questioned the identical figures for opening and closing stock of iron ore fines, which had been consistently shown since the assessment year 2009-2010 due to an unresolved dispute. The Tribunal noted that this issue was related to earlier assessment years and could not be considered for revision under section 263 for the current assessment year. The Tribunal found that the Pr.CIT had not dislodged the assessee's explanation regarding the unresolved dispute and technical issues preventing the sale of the stock. Therefore, the Tribunal quashed the revisionary proceedings on this issue as well. Conclusion: The Tribunal quashed the revisionary proceedings initiated by the Pr.CIT on all four issues, thereby allowing the appeal of the assessee. The order was dictated and pronounced in the open court on 12/01/2023.
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