9911796707
TMI Blog2025 (2) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was of the bonafide belief that the liability to incur expenses in terms of Rule 34 of the Mineral Conservation and Development Rules, 1988 was an ascertained liability and provision created to meet the same was allowable as deduction under Section 37(1) of the Act. We find that explanation furnished by the Assessee is also supported by documents filed during the original assessment proceedings. Accordingly, we do not find any infirmity in the order passed by the CIT(A) holding that no penalty could have been levied in the facts and circumstances of the present case for furnishing inaccurate particulars of income. Defective notice u/s 274 - On a co-joint reading of Paragraph 11.13 and 13 of the Penalty Order it becomes clear that the Assessing Officer has finally levied penalty under Section 271(1)(c) of the Act (read with Explanation 1 thereto) for concealment of the particulars of income whereas the charge as per the Assessment Order passed under Section 143(3) r.w.s. 263 of the Act and Notice issued under Section 274 of the Act was that the Assessee has furnished inaccurate particulars of income. Therefore, on this count also penalty levied by the AO u/s 271(1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses of INR. 3.98 Crores. Thereafter, the Assessing Officer passed the Assessment Order under section 143(3) read with Section 263 of the Act on 07/06/2017 making addition of INR.3.98 Crores by disallowing the deduction claimed in respect of Provisions for Mines Reclamation Expenses and initiated penalty proceeding for furnishing inaccurate particulars of income under Section 271(1)(c) of the Act. 4. During the penalty proceedings, the Assessee was asked to show cause as to why penalty under Section 271(1)(c) of the Act should not be levied for furnishing inaccurate particulars of income vide notice, dated 07/06/2017, issued under Section 274 of the Act. In response it was submitted by the Assessee that the Assessee had made complete and true disclosure of all the facts and therefore, it cannot be said that the Assessee had furnished inaccurate particulars income. It was contended that the penalty should not be merely on account of rejection of claim of deduction. However, the Assessing Officer was not convinced and rejected the aforesaid submissions made by the Respondent. The Assessing Officer concluded that the Assessee had made patently untenable claim in respect of Provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and Other Expenses. In this regard relevant extracts of the Audited Accounts for the year ended 31 March, 2011 are already enclosed as Annexure 20. The assessee company, being a cement manufacturer requires a variety of raw materials for the production of cement. Amongst all, 'limestone' is one of the most basic and important raw material for the manufacture of cement. It is found in mine beds lying underneath the ground. Hence, in order to procure the limestone from underneath the ground, the assessee company has entered into mining lease agreements in order to take possession of lands where limestone is expected to occur. By reason of the mining operations carried on, the surface of the land gets disturbed and as per the provisions of the Mineral Concession Rules, 1960 the assessee is statutorily required to restore the land to its original position by filling up the pits. Accordingly, mines reclamation expenditure is incurred on an on-going basis and until the closure of the mine. The aforementioned expenditure of Rs. 3,98,19,350/- in respect of mines reclamation has been made in relation to work carried out for the purpose of reclamation of mining land. 21.2. Relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment Act 1957. 11. We find that during the assessment proceedings, the Assessee had placed on record working details of Mine Reclamation Expenses claimed as deduction for the relevant previous year and had relied upon Schedule 'P' of Notes forming Part of Accounts for the relevant previous year wherein the following disclosure was made by the Assessee: SCHEDULE 'P' - NOTES FORMING PART OF THE ACCOUNTS (contd.) 2010-11 Rs Ambuja Nagar Rs Rabriyawas Rs Maratha Rs Bhatapara Rs Rauri Rs Darlaghat Rs 11 Movement of provisions during the period as Mine Reclamation Expenditure Closing Provision as 31-03-2011 12,06,35,705 5,56,97,840 Exhibit A 1,38,23,384 Exhibit B 1,96,74,506 Exhibit C 1,73,10,410 Exhibit D 4,85,000 Exhibit E 1,36,43,584 - Less: Opening Provision as on 01-04-2010 10,26,34,030 6,10,20,378 62,52,033 1,02,97,614 1,14,62,336 1,36,01,669 1,80,01,674 (53,22,538) 75,71,351 93,76,892 58,48,074 4,85,980 41,915 Add: Utilisation during the period (2,18,17,676) (2,18,17,676) Exhibit F Provision made during the year 2010-11 3,98,19,350 1,64,95,138 75,71,351 93,76,892 58,48,074 4,85,980 41,915 Mine reclamation expenses is incurred on an on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he holder of prospecting license or mining lease to undertake phased restoration, reclamation and rehabilitation of land affected by prospecting or mining operations. During the original assessment proceedings, the Assessee had relied upon the judgment of the Hon'ble Karnataka High Court in the case of CIT versus Gogte Minerals: [1996] 85 Taxmann 163 (Karnataka) [19/09/1995], wherein the deduction for mine reclamation expenses incurred in terms of Rule 34 of the Mineral Conservation and Development Rules, 1988 was allowed as deduction under Section 37(1) of the Act. During the course of the hearing, it was pointed out by the Learn Department Representative that in the present case the Assessee had not only claim deduction for actual expenses incurred but had also claimed deduction in respect of provision created for mine reclamation expenses and therefore, the claim made by the Assessee was untenable in law. As discussed hereinabove, we find that the claim made by the Assessee was premised upon the understanding that Section Rule 34 of the Mineral Conservation and Development Rules, 1988 fastens the liability upon the Assessee to incur the mine restoration expenses and therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) holding that no penalty could have been levied in the facts and circumstances of the present case for furnishing inaccurate particulars of income. 16. Before parting we would like to observe that during the proceeding before the Tribunal, it was vehemently contended on behalf of the Revenue that the CIT(A) has incorrectly returned the finding that the notice issued in the Section 274 of the Act was defective as the same did not specify the specific charge for which penalty was sought to be levied under Section 271(1)(c) of the Act. We find that in the Assessment Order dated 07/06/2017 passed under Section 143(3) read with Section 263 of the Act, the penalty proceedings were sought to be initiated by the Assessing Officer in respect of provision for Mine Reclamation Expenses of INR.3.98 Crores on account of furnishing inaccurate particulars of income. Even in the notice, dated 07/06/2017, issued under Section 274 of the Act it was clearly stated that penalty proceedings were initiated for furnishing inaccurate particulars of income. However, while passing Penalty Order, the Assessing Officer had concluded that the present case was a fit case for levy of penalty under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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