9911796707
TMI Blog2016 (7) TMI 1435X X X X Extracts X X X X X X X X Extracts X X X X ..... l mining alleged by the AO or for any penalty in respect of such illegal mining because the disallowance has been made by the AO to the extent of 40% of the total mining expenses and since 60% of the expenses are allowed by the AO, the remaining 40% of the same expenses cannot be considered as expenses for the purpose of offence or unlawful purposes. Hence, this disallowance is not justified. Addition of expenditure incurred on vehicles, Telephone for personal use of directors - Held that:- This issue is covered in favour of the assessee by the judgment of the Hon’ble Gujarat High Court rendered in the case of Sayaji Iron 86,60,079/- for which addition has been by the AO is the amount of assessee’s share in the sale consideration for sale of land and hence, even if it is held that income on this account is to be taxed in the present year, the same cannot be to the extent of gross amount of sale proceeds and income has to be assessed after allowing deduction regarding cost of acquisition, if any incurred by the assessee but since there is no discussion on this aspect in the orders of the authorities below, we feel it proper that this issue should be restored back to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the method of accounting regularly followed by the appellant. 6. The appellant seeks your leave to add, alter, amend or delete any grounds urged at the time of hearing. 3. It was submitted by the ld. AR of the assessee that ground no.1 is general in nature and hence we hold that no adjudication is called for regarding ground no.1 of the appeal. 4. Regarding ground no.2, it was sub mitted by the ld. AR of the assessee that it is noted by the AO on page 15 of the assessment order that the assessee had made the request for cross examination of the transporters from whom statement u/s 131 has been recorded but it is not considered necessary because the entire expenditure has been proved to be bogus through independent evidence collected from Transport Department and the banks. He submitted that when the assessee has requested for cross examination, the same should have been allowed and when the same is not allowed then such statement cannot be relied upon for making addition in the present case. In support of this contention, reliance was placed on the judgment of the Hon'ble Delhi High Court rendered in the case of CIT Vs SMC Share Brokers Ltd., as reported in 288 ITR 345 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract of the reply was reproduced by the AO on page-12 to16 of the assessment order. For the sake of ready reference, para 1.7 to 1.10 of the assessment order are reproduced herein below containing the discussion regarding show cause notice, the assessee's reply and the reasons given by the AO for not accepting the reply of the assessee and thereafter, the final decision of the AO for making disallowance of ₹ 168.69 Lakhs. "1.7 Show cause notice: In the above circumstances, the assessee was asked to explain, vide letter dated 13.02.2013 and served on the AIR of the assessee Shri Vasudev Vittal leji on 21.02.2013, why the amount claimed as transportation expenses against the names of the above parties should not be disallowed and added back to its returned Income. 1.8 The assessee furnished reply vide letter dated: 27.02.2013 filed at this office on 25/03/2013. The relevant extract of this reply is reproduced as under: "In the above9 letter, The learned Deputy Commissioner has proposed to disallow transportation charges paid to 28 parties in Ananthapur and 10 parties in Proddutur. The reason given by the Deputy Commissioner is that 'The Assessing Officer has st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence 'of the parties, the DCIT may call for the accounts copies of the above parties from the banks and the DCIT may summon the above transporters and examine them on oath. In case any of the above parties claims that they have not received the above payments, the assessee may given an opportunity to cross examine them, which is necessary in the interest of natural justice. On the above mentioned ground we hereby object for the disallowance of the transportation charges unless the. assessee is given an opportunity to rebutting the evidence in the custody of the learned Deputy Commissioner. 1.9 The assessee's reply is considered carefully and is not accepted for the following reasons; There is a substantial increase in the transportation expenses claimed during the year under assessment as compared with the earlier years, which is not in proportion to the quantity of iron ore produced and sold during this year. The assessee could not discharge its onus of proving the genuineness of the expenditure by producing evidence to show the actual rendering of services. Though the assessee claimed that the expenditure is supported by bills and vouchers, it could not produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank accounts by the assessee's employees and Shri Gangadhar alongwith the clerks acting on instructions of the assessee's CA. vi) It has been proved that the entire money deposited through cheques into the alleged transporters bank accounts has been withdrawn by the assessee's employees and Shri Gangadhar alongwith his clerks acting on instructions of the assesee's CA. vii) It has been proved by the admission of the alleged transporters that their books of accounts were written with fictitious entries only recently (one or two months before the date of this order) when they were called for verification by the AO during scrutiny proceedings viii) It has been proved by making enquiries with the road transport department that the lorry numbers shown in the books of accounts produced by some of the alleged transporters are non-existent or that they relate to non-goods carriers, viz., school bus ambulance, two wheelers etc., It becomes clear that the assessee company by adopting the above modus operandi has booked bogus expenditure in its financial statements which was not incurred for the purpose of its business. The assesee's request seeking cross examination of the transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT Vs SMC Share Brokers Ltd., (Supra). In this case, it was held by the Hon'ble Delhi High Court that in the absence of third party being made available for cross examination despite repeated requests by the assessee, his statement could not be relied upon to the detriment of the assessee and Tribunal was justified in setting aside block assessment. 8. In the next judgment of the Hon'ble Delhi High Court rendered in the case of CIT Vs Pradeep Kumar Gupta (Supra) also, it was held by the Hon'ble Delhi High Court that it was mandatory for the revenue to produce A for cross examination by the assessee on the specific demand in this regard and thereafter, it was held that the violation of the revenue to produce A for cross examination by the assessee assumes fatal consequences. Hence, as per these two judgments, for this reason alone that the revenue has not made available these persons for cross examination of the assessee despite such request by the assessee before the AO, these statements cannot be used against the assessee and without taking help from these statements of the transporters, the disallowance made by the AO out of transportation charges is not sustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re old leases which have been renewed by the GOI. The leases listed at Sl.NO.5 and 6 are the fresh leases approved by the GOI. Copies of the GOI orders/GOAP orders along with the lease sketches are given at Annexure-I to Annexure-6. 1. Genesis of the problem in Iron ore mining leases in Bellary RF of Ananthpur District. a. Status of boundary demarcation of various leases. i. There are five individual leases as mentioned above from Sl.NO.1 to 5 are located at one place close to each other in compartment NO.695 of Bellary RF where boundary disputes have arisen. ii. All the leases were sanctioned individually in different years. For all these lees in individual surveyed sketches (whether original lease or renewal lease), no tie line particulars with a known permanent feature was shown excepting the marking of the GTS station on the common boundary of Y.M.& Sons and BIOP leases. In the absence of tie line particulars in the sketches for any survey station, once the boundary pillars are disturbed, it is very difficult to demarcate the leave boundary in the field. iii. Even in the description of boundaries as given in the agreement of original leases entered by the user agency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w is proved but this cannot be said that the expenses is incurred for any purpose which is an offence or which is prohibited by law. The expenses for mining itself is not an offence or prohibited by law because the AO himself has allowed deduction to the extent of 60% of the same expenses. Hence, such expenses cannot be disallowed and in our considered opinion, this dispute can be viewed from a different angle also. Suppose a person is engaged in the activities of smuggling, legal action can be taken against such person for carrying out such illegal activity but for taxing the income from smuggling if any, it cannot be said that the entire sale proceeds will be taxed without allowing any deduction in respect of purchase of smuggled goods. In computing the same income from smuggling of goods, if the assessee has incurred some expenses for facilitating such smuggling then such expenses may be disallowed but not the cost of purchase of smuggled goods. Similarly, in the present case, even if the assessee is held to be engaged in illegal mining activity and the assessee claims deduction in respect of some expenses having been incurred by assessee for carrying out illegal mining activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation to section 37 (1) is not attracted in the facts of the present case. In view of our above discussion, ground no.3 of the assessee is allowed. 16. Regarding ground no.4, it was submitted by the ld. AR of the assessee that it is noted by the AO in para-3.3 of the assessment order that the assessee has not discharged its onus to prove that the entire expenses in respect of repairs and maintenance and depreciation on Helicopter has been incurred wholly and exclusively for the purpose of its business. The AO has considered that 50% of such expenses is for person use of Helicopter by the Director of the assessee company and he made disallowance of 50% of such expenses. He submitted that this issue is squarely covered in favour of the assessee by the judgment of the Hon'ble Gujarat High Court rendered in the case of Sayaji Iron & Engg.Co. Vs CIT as reported in253 ITR 749. 17. On this issue also, ld. DR of the revenue supported the orders of the authorities below. 18. We have considered the rival submissions. We find force in the submission of the ld. AR of the assessee that this issue is covered in favour of the assessee by the judgment of the Hon'ble Gujarat High Court r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
