Income Tax Appellate Tribunal - Ranchi
M/S Jharkhand State Minerals ... vs Dcit -Cir-1 , Ranchi on 15 March, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "RANCHI", BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA Nos.337 to 342/Ran/2017 ( नधा रणवष / Assessment Years: 2008-09 to 2013-14) M/s Jharkhand State Minerals Vs. DCIT, Circle-1, Ranchi Development Corporation Nepal House Area, Doranda, Ranchi-
834002.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AABCJ 2578 C (Assessee) .. (Revenue) Assessee by : Shri Devesh Poddar, Advocate Respondent by : Shri P.K. Mondal, JCIT सन ु वाईक तार ख/ Date of Hearing : 11/01/2019 घोषणाक तार ख/Date of Pronouncement : 15/03/2019 आदे श / O R D E R Per Bench:
The captioned six appeals filed by the Assessee, pertaining to assessment years 2008-09 to 2013-14 respectively are directed against the separate orders passed by the Commissioner of Income Tax (Appeal)-Ranchi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short the Act).
2. Since these six appeals filed by the assessee contained common and identical issues therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
3. In these appeals , however the assessee have raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee are concised and summarized as follows:
I) The ld. CIT(A) erred in disallowing the prior period expenses the details of which are as follows:
a) I.T.A. No. 337/Ran/2017 for assessment year 2008-09 Prior Period Expenses of Rs. 89,98,315/-
b) I.T.A No. 338/Ran/2017 for assessment year 2009-10 Prior Period Expenses of Rs. 3,65,17,347/-
c) I.T.A. No. 339/Ran/2017 for assessment year 2010-11 Prior Period Expenses of Rs. 21,45,003/-
For these prior period expenses we take assessee's appeal in I.T.A. No. 337/Ran/2017 for assessment year 2008-09 as a lead case.
4. Brief facts qua the issue are that the assessee is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the ld. Assessing Officer has noted that the assessee had debited a sum of Rs. 89,98,315/- under the head 'Prior Period Expenses'. The ld. Assessing Officer held that these expenses is non- admissible and added the same to the income of the assessee.
5. During the assessment proceedings, the assessee submitted before the A.O. that prior period expenses were admissible expenditure however in the mercantile system of accounting it has to be brought on record that the expenditure was crystallized during the year under consideration and the appellant was not aware of its liability for expenses to provide for the same in the relevant accounting period. It was submitted that the assessee is a company in control of state of Jharkhand for development of minor and major minerals and assessee derives income mainly from coal mines allotted to the assessee by Jharkhand Government. There were many expenses which were not known or not ascertained during the year under Pa g e | 2 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 consideration, as such, they could not be provided. As the expenses were crystallized , same were provided and claimed as prior period expenses. The expenses incurred were fully verifiable and was examined by Internal Auditor, by Statutory Auditor and by CAG being the public sector undertaking. The ld. Assessing Officer was therefore not justified in making the disallowance. However The ld. Assessing Officer rejected the contention of the assessee and has held that 'Prior Period Expenses' were not admissible expenses and therefore, he disallowed the same.
6. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"5.3. Apart from claiming that the prior period expenses were business expenses and had crystallized during the year no evidence to this effect was filed. Nature of these expenses is not known. In what manner were these incurred in the previous financial years and crystallized during the financial year relevant to assessment year 2008-09 too is not known. The plea of the appellant rests on the audit carried out by the C&AG. However, it must be borne in mind that the mandate and the scope of Audit of the C&AG is very different and an audit by the C&AG ipso facto does not declare an item of expenses as allowable under the Act.
5.4 The law regarding claim of expenses is clear. The onus is clearly on the appellant to show that the expenses were incurred and that they were revenue in nature while at the same time that they were laid out wholly and exclusively for the purpose of business. The burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction is on the assessee. The mere object of incurring expenditure is not decisive whether it is of a capital nature or revenue nature. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility of deduction is not in' the nature of capital expenditure. Further, mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same is proved to be paid for commercial consideration. The onus of proof is always upon the assessee. It cannot be said that even if the taxpayer does not produce any evidence in support of the claim for deduction, the Assessing Officer himself independently is to collect and decide that the deduction claimed is allowable having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. But, whether an assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which he might take of his rights. At the same time, the o.nus is on the assessee to establish that there are facts in existence which entitle it to a deduction and it is for the assessee to adduce necessary evidence in this regard. Therefore, if the assessee fails to place sufficient materials, he is not entitled to claim allowance under section 37(1).The position is well-settled by the judgments of the Apex Court in CIT v. Calcutta Agency Ltd.
Pa g e | 3 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 [1951] 19 ITR 191 and CIT v. Imperial Chemical Industries (I) (P.) Ltd. [1969] 74ITR 17.
5.5 Accordingly, it is held that the Ld. Assessing Officer had correctly made a disallowance of the amount. Ground of appeal is dismissed."
7. We have heard both the parties and perused the material available on record. We note that prior period expenses have crystallized in the respective assessment years. These expenses has not been allowed based on accrual concept in the previous year. When the existence of these expenses and crystallization of these expenses happened in the respective assessment years, then these expenses should be allowed. Since these expenses have crystallized in the assessment year under consideration, hence we allow the claim of the assessee, in the respective assessment years as mentioned in summarized ground no. 3 of the order.
8. Ground no. 2 raised by the assessee in I.T.A. No. 339/Ran/2017 for assessment year 2010-11 reads as under:
2. For that income returned by the appellant was Rs. 19,87,46,018/- as such, the ld. A.O. was not initiated for computing income at Rs.
25,15,36,880/- 'income submitted by appellant'. This is factually incorrect and net income after considering all out going was Rs. 19,87,46,018/- income disclosed in the return filed.
9. We have heard both the parties and perused the material available on record. We note that the grievance of the assessee was that income returned by the assessee was to the tune of Rs. 19,87,46,018/- whereas the Assessing Officer initiated for computation of income at Rs. 25,15,36,880/-. We note that as per assessee it is factually incorrect and net income after considering all outgoing was to the tune of Rs. 19,87,46,018/-, that the income disclosed in the return filed by the assessee. We are of the view that this issue needs to be verified by the Assessing Officer therefore we think it fit and appropriate to remit this issue to the file of Assessing Officer for his necessary verification and adjudicate the issue in accordance with law. Therefore we allow this ground of the assessee for statistical purposes.
Pa g e | 4 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
10. Ground no. 3 raised by the assessee in I.T.A. No. 340/Ran/2017 for assessment year 2011-12, the ld. CIT(A) estimated gross profit @ 20% whereas the assessee shown profit @ 19.5% in his books of accounts.
Ground raised by the assessee in I.T.A. No. 341/Ran/2017 for assessment year 2012-13, the ld. CIT(A) estimated gross profit 8% whereas the assessee shown profit @ 7.5%.
In I.T.A. No. 342/Ran/2017 for assessment year 2013-14 the ld. CIT(A) estimated gross profit @ 8% whereas assessee shown gross profit @ 1.13%.
11. We note these three ground relate to estimated gross profit therefore we take lead case of assessee's appeal in I.T.A. No. 340/Ran/2017 for assessment year 2011-12.
12. Brief facts qua the issue are that the appellant which is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the assessee was not able to produce books of accounts. The ld. Assessing Officer has noted that the assessee was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The ld. Assessing Officer, accordingly rejected the books of accounts of the assessee and in place of profit of 19.5% shown by the assessee on a turnover of Rs. 1,05,97,00,000/- estimated the profit @ 20% thereby making an addition of Rs. 71,40,000/- to the income of the assessee. Total income was assessed at Rs. 21,19,40,000/-. As regards the addition made by the Assessing Officer the assessee has stated that the assessee is a 100 percent Jharkhand Government owned company and was doing business of mining of coal and other major and minor minerals with an intention to develop mining of minerals which may not be profitable. Assessee had disclosed total receipts of Rs. 1,05,97,00,000/- on which net profit of Rs. 20,48,00,000/- was disclosed. The accounts of the appellant were not audited by CAG even though statutory audit was completed on the basis of which return of income was filed disclosing income computed as per statutory audit. No audited profit and loss account or balance Pa g e | 5 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 sheet was filed. However, details of sales in quantity and in value with gross profit and net profit earned was shown as per provisional project wise profit and loss account. The Ld. Assessing Officer made an estimate of net profit at 20% on total sales disclosed as per Profit and loss account thereby an addition of Rs. 71,40,000/- was made. The Appellant disputed this addition on the ground that verifiable books of account were maintained and were audited by statutory auditors and also by CAG although audit of CAG was not completed till the return was filed. The Ld. Assessing Officer, in the assessment order has noted that the assessee did not file its return of income. Accordingly, notice u/s.148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the appellant was not able to produce books of accounts. The Ld. Assessing Officer has noted that the appellant was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The Ld. Assessing Officer, accordingly rejected the books of accounts of the appellant and in place of profit of 19.5% shown by the appellant on a turnover of Rs. 1,05,97,00,000/- estimated the profit @20% thereby making an addition of Rs. 71,40,000/- to the income of the appellant. Total income was assessed at Rs. 2l, 19,40,000/-.
13. Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"Under the circumstances, the ld. Assessing Officer was justified in rejecting the profits as shown by the assessee and applying profit of 20%. It must also be noted that the enhancement of profit is only by half a percentage point which cannot be called as excessive and arbitrary. It is true that in estimating profits there would be some element of guess work. In CST v. H.M. Esufali, H, M. Abdulali [1973] 90 ITR 271 , the Supreme Court observed that it is inevitable that there is some guess work while making the best judgment assessment. The Assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rational base, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the Assessing authority is the best judge of the situation. It is his best judgment and not any one else's. As would be seen from the above judgment, the only issues which the ld. Assessing Officer needs to cover while making a best judgment are that there needs to be a rational basis and the estimation should not be vindictive or capricious. The fact that the books of accounts were not produced by the assessee and the assessee was unable to justify its return, the rejection of books of accounts and estimation of profit by enhancing the same by half a Pa g e | 6 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 percentage point meets all the conditions as mandated by the Apex court in the above referred judgment".
14. We have heard both the parties and perused the material available on record. We note that since assessee's books are audited, the Assessing Officer did not find any mistake in assessee's books. Books of accounts are audited. Assessee is a govt. owned company its accounts are subject to CAG audit therefore profit estimated by ld. CIT(A) at higher rate than what is declared by assessee is not acceptable. Therefore, we accept the gross profit rate declared by the assessee in A.Y. 2011-12 @ 19.5% in A.Y. 2012-13 @ 7.5% and in A.Y. 2013-14 @ 1.13%.
15. . In the result, all the appeals of the assessee is allowed.
Order pronounced in the Court on 15.03.2019
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 15/03/2019
(SB, Sr.PS)
Copy of the order forwarded to:
1. M/s Jharkhand State Minerals Development Corporation
2. DCIT, Circle-1, Ranchi
3. C.I.T(A)- 4. C.I.T.- Ranchi
5. CIT(DR), Ranchi Bench, Ranchi .
6. Guard File.
True copy By Order Assistant Registrar ITAT, Ranchi Bench Pa g e | 7 IN THE INCOME TAX APPELLATE TRIBUNAL "RANCHI", BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA Nos.337 to 342/Ran/2017 ( नधा रणवष / Assessment Years: 2008-09 to 2013-14) M/s Jharkhand State Minerals Vs. DCIT, Circle-1, Ranchi Development Corporation Nepal House Area, Doranda, Ranchi-
834002.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AABCJ 2578 C (Assessee) .. (Revenue) Assessee by : Shri Devesh Poddar, Advocate Respondent by : Shri P.K. Mondal, JCIT सन ु वाईक तार ख/ Date of Hearing : 11/01/2019 घोषणाक तार ख/Date of Pronouncement : 15/03/2019 आदे श / O R D E R Per Bench:
The captioned six appeals filed by the Assessee, pertaining to assessment years 2008-09 to 2013-14 respectively are directed against the separate orders passed by the Commissioner of Income Tax (Appeal)-Ranchi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short the Act).
2. Since these six appeals filed by the assessee contained common and identical issues therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
3. In these appeals , however the assessee have raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee are concised and summarized as follows:
I) The ld. CIT(A) erred in disallowing the prior period expenses the details of which are as follows:
a) I.T.A. No. 337/Ran/2017 for assessment year 2008-09 Prior Period Expenses of Rs. 89,98,315/-
b) I.T.A No. 338/Ran/2017 for assessment year 2009-10 Prior Period Expenses of Rs. 3,65,17,347/-
c) I.T.A. No. 339/Ran/2017 for assessment year 2010-11 Prior Period Expenses of Rs. 21,45,003/-
For these prior period expenses we take assessee's appeal in I.T.A. No. 337/Ran/2017 for assessment year 2008-09 as a lead case.
4. Brief facts qua the issue are that the assessee is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the ld. Assessing Officer has noted that the assessee had debited a sum of Rs. 89,98,315/- under the head 'Prior Period Expenses'. The ld. Assessing Officer held that these expenses is non- admissible and added the same to the income of the assessee.
5. During the assessment proceedings, the assessee submitted before the A.O. that prior period expenses were admissible expenditure however in the mercantile system of accounting it has to be brought on record that the expenditure was crystallized during the year under consideration and the appellant was not aware of its liability for expenses to provide for the same in the relevant accounting period. It was submitted that the assessee is a company in control of state of Jharkhand for development of minor and major minerals and assessee derives income mainly from coal mines allotted to the assessee by Jharkhand Government. There were many expenses which were not known or not ascertained during the year under Pa g e | 2 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 consideration, as such, they could not be provided. As the expenses were crystallized , same were provided and claimed as prior period expenses. The expenses incurred were fully verifiable and was examined by Internal Auditor, by Statutory Auditor and by CAG being the public sector undertaking. The ld. Assessing Officer was therefore not justified in making the disallowance. However The ld. Assessing Officer rejected the contention of the assessee and has held that 'Prior Period Expenses' were not admissible expenses and therefore, he disallowed the same.
6. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"5.3. Apart from claiming that the prior period expenses were business expenses and had crystallized during the year no evidence to this effect was filed. Nature of these expenses is not known. In what manner were these incurred in the previous financial years and crystallized during the financial year relevant to assessment year 2008-09 too is not known. The plea of the appellant rests on the audit carried out by the C&AG. However, it must be borne in mind that the mandate and the scope of Audit of the C&AG is very different and an audit by the C&AG ipso facto does not declare an item of expenses as allowable under the Act.
5.4 The law regarding claim of expenses is clear. The onus is clearly on the appellant to show that the expenses were incurred and that they were revenue in nature while at the same time that they were laid out wholly and exclusively for the purpose of business. The burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction is on the assessee. The mere object of incurring expenditure is not decisive whether it is of a capital nature or revenue nature. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility of deduction is not in' the nature of capital expenditure. Further, mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same is proved to be paid for commercial consideration. The onus of proof is always upon the assessee. It cannot be said that even if the taxpayer does not produce any evidence in support of the claim for deduction, the Assessing Officer himself independently is to collect and decide that the deduction claimed is allowable having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. But, whether an assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which he might take of his rights. At the same time, the o.nus is on the assessee to establish that there are facts in existence which entitle it to a deduction and it is for the assessee to adduce necessary evidence in this regard. Therefore, if the assessee fails to place sufficient materials, he is not entitled to claim allowance under section 37(1).The position is well-settled by the judgments of the Apex Court in CIT v. Calcutta Agency Ltd.
Pa g e | 3 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 [1951] 19 ITR 191 and CIT v. Imperial Chemical Industries (I) (P.) Ltd. [1969] 74ITR 17.
5.5 Accordingly, it is held that the Ld. Assessing Officer had correctly made a disallowance of the amount. Ground of appeal is dismissed."
7. We have heard both the parties and perused the material available on record. We note that prior period expenses have crystallized in the respective assessment years. These expenses has not been allowed based on accrual concept in the previous year. When the existence of these expenses and crystallization of these expenses happened in the respective assessment years, then these expenses should be allowed. Since these expenses have crystallized in the assessment year under consideration, hence we allow the claim of the assessee, in the respective assessment years as mentioned in summarized ground no. 3 of the order.
8. Ground no. 2 raised by the assessee in I.T.A. No. 339/Ran/2017 for assessment year 2010-11 reads as under:
2. For that income returned by the appellant was Rs. 19,87,46,018/- as such, the ld. A.O. was not initiated for computing income at Rs.
25,15,36,880/- 'income submitted by appellant'. This is factually incorrect and net income after considering all out going was Rs. 19,87,46,018/- income disclosed in the return filed.
9. We have heard both the parties and perused the material available on record. We note that the grievance of the assessee was that income returned by the assessee was to the tune of Rs. 19,87,46,018/- whereas the Assessing Officer initiated for computation of income at Rs. 25,15,36,880/-. We note that as per assessee it is factually incorrect and net income after considering all outgoing was to the tune of Rs. 19,87,46,018/-, that the income disclosed in the return filed by the assessee. We are of the view that this issue needs to be verified by the Assessing Officer therefore we think it fit and appropriate to remit this issue to the file of Assessing Officer for his necessary verification and adjudicate the issue in accordance with law. Therefore we allow this ground of the assessee for statistical purposes.
Pa g e | 4 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
10. Ground no. 3 raised by the assessee in I.T.A. No. 340/Ran/2017 for assessment year 2011-12, the ld. CIT(A) estimated gross profit @ 20% whereas the assessee shown profit @ 19.5% in his books of accounts.
Ground raised by the assessee in I.T.A. No. 341/Ran/2017 for assessment year 2012-13, the ld. CIT(A) estimated gross profit 8% whereas the assessee shown profit @ 7.5%.
In I.T.A. No. 342/Ran/2017 for assessment year 2013-14 the ld. CIT(A) estimated gross profit @ 8% whereas assessee shown gross profit @ 1.13%.
11. We note these three ground relate to estimated gross profit therefore we take lead case of assessee's appeal in I.T.A. No. 340/Ran/2017 for assessment year 2011-12.
12. Brief facts qua the issue are that the appellant which is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the assessee was not able to produce books of accounts. The ld. Assessing Officer has noted that the assessee was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The ld. Assessing Officer, accordingly rejected the books of accounts of the assessee and in place of profit of 19.5% shown by the assessee on a turnover of Rs. 1,05,97,00,000/- estimated the profit @ 20% thereby making an addition of Rs. 71,40,000/- to the income of the assessee. Total income was assessed at Rs. 21,19,40,000/-. As regards the addition made by the Assessing Officer the assessee has stated that the assessee is a 100 percent Jharkhand Government owned company and was doing business of mining of coal and other major and minor minerals with an intention to develop mining of minerals which may not be profitable. Assessee had disclosed total receipts of Rs. 1,05,97,00,000/- on which net profit of Rs. 20,48,00,000/- was disclosed. The accounts of the appellant were not audited by CAG even though statutory audit was completed on the basis of which return of income was filed disclosing income computed as per statutory audit. No audited profit and loss account or balance Pa g e | 5 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 sheet was filed. However, details of sales in quantity and in value with gross profit and net profit earned was shown as per provisional project wise profit and loss account. The Ld. Assessing Officer made an estimate of net profit at 20% on total sales disclosed as per Profit and loss account thereby an addition of Rs. 71,40,000/- was made. The Appellant disputed this addition on the ground that verifiable books of account were maintained and were audited by statutory auditors and also by CAG although audit of CAG was not completed till the return was filed. The Ld. Assessing Officer, in the assessment order has noted that the assessee did not file its return of income. Accordingly, notice u/s.148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the appellant was not able to produce books of accounts. The Ld. Assessing Officer has noted that the appellant was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The Ld. Assessing Officer, accordingly rejected the books of accounts of the appellant and in place of profit of 19.5% shown by the appellant on a turnover of Rs. 1,05,97,00,000/- estimated the profit @20% thereby making an addition of Rs. 71,40,000/- to the income of the appellant. Total income was assessed at Rs. 2l, 19,40,000/-.
13. Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"Under the circumstances, the ld. Assessing Officer was justified in rejecting the profits as shown by the assessee and applying profit of 20%. It must also be noted that the enhancement of profit is only by half a percentage point which cannot be called as excessive and arbitrary. It is true that in estimating profits there would be some element of guess work. In CST v. H.M. Esufali, H, M. Abdulali [1973] 90 ITR 271 , the Supreme Court observed that it is inevitable that there is some guess work while making the best judgment assessment. The Assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rational base, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the Assessing authority is the best judge of the situation. It is his best judgment and not any one else's. As would be seen from the above judgment, the only issues which the ld. Assessing Officer needs to cover while making a best judgment are that there needs to be a rational basis and the estimation should not be vindictive or capricious. The fact that the books of accounts were not produced by the assessee and the assessee was unable to justify its return, the rejection of books of accounts and estimation of profit by enhancing the same by half a Pa g e | 6 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 percentage point meets all the conditions as mandated by the Apex court in the above referred judgment".
14. We have heard both the parties and perused the material available on record. We note that since assessee's books are audited, the Assessing Officer did not find any mistake in assessee's books. Books of accounts are audited. Assessee is a govt. owned company its accounts are subject to CAG audit therefore profit estimated by ld. CIT(A) at higher rate than what is declared by assessee is not acceptable. Therefore, we accept the gross profit rate declared by the assessee in A.Y. 2011-12 @ 19.5% in A.Y. 2012-13 @ 7.5% and in A.Y. 2013-14 @ 1.13%.
15. . In the result, all the appeals of the assessee is allowed.
Order pronounced in the Court on 15.03.2019
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 15/03/2019
(SB, Sr.PS)
Copy of the order forwarded to:
1. M/s Jharkhand State Minerals Development Corporation
2. DCIT, Circle-1, Ranchi
3. C.I.T(A)- 4. C.I.T.- Ranchi
5. CIT(DR), Ranchi Bench, Ranchi .
6. Guard File.
True copy By Order Assistant Registrar ITAT, Ranchi Bench Pa g e | 7 IN THE INCOME TAX APPELLATE TRIBUNAL "RANCHI", BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA Nos.337 to 342/Ran/2017 ( नधा रणवष / Assessment Years: 2008-09 to 2013-14) M/s Jharkhand State Minerals Vs. DCIT, Circle-1, Ranchi Development Corporation Nepal House Area, Doranda, Ranchi-
834002.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AABCJ 2578 C (Assessee) .. (Revenue) Assessee by : Shri Devesh Poddar, Advocate Respondent by : Shri P.K. Mondal, JCIT सन ु वाईक तार ख/ Date of Hearing : 11/01/2019 घोषणाक तार ख/Date of Pronouncement : 15/03/2019 आदे श / O R D E R Per Bench:
The captioned six appeals filed by the Assessee, pertaining to assessment years 2008-09 to 2013-14 respectively are directed against the separate orders passed by the Commissioner of Income Tax (Appeal)-Ranchi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short the Act).
2. Since these six appeals filed by the assessee contained common and identical issues therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
3. In these appeals , however the assessee have raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee are concised and summarized as follows:
I) The ld. CIT(A) erred in disallowing the prior period expenses the details of which are as follows:
a) I.T.A. No. 337/Ran/2017 for assessment year 2008-09 Prior Period Expenses of Rs. 89,98,315/-
b) I.T.A No. 338/Ran/2017 for assessment year 2009-10 Prior Period Expenses of Rs. 3,65,17,347/-
c) I.T.A. No. 339/Ran/2017 for assessment year 2010-11 Prior Period Expenses of Rs. 21,45,003/-
For these prior period expenses we take assessee's appeal in I.T.A. No. 337/Ran/2017 for assessment year 2008-09 as a lead case.
4. Brief facts qua the issue are that the assessee is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the ld. Assessing Officer has noted that the assessee had debited a sum of Rs. 89,98,315/- under the head 'Prior Period Expenses'. The ld. Assessing Officer held that these expenses is non- admissible and added the same to the income of the assessee.
5. During the assessment proceedings, the assessee submitted before the A.O. that prior period expenses were admissible expenditure however in the mercantile system of accounting it has to be brought on record that the expenditure was crystallized during the year under consideration and the appellant was not aware of its liability for expenses to provide for the same in the relevant accounting period. It was submitted that the assessee is a company in control of state of Jharkhand for development of minor and major minerals and assessee derives income mainly from coal mines allotted to the assessee by Jharkhand Government. There were many expenses which were not known or not ascertained during the year under Pa g e | 2 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 consideration, as such, they could not be provided. As the expenses were crystallized , same were provided and claimed as prior period expenses. The expenses incurred were fully verifiable and was examined by Internal Auditor, by Statutory Auditor and by CAG being the public sector undertaking. The ld. Assessing Officer was therefore not justified in making the disallowance. However The ld. Assessing Officer rejected the contention of the assessee and has held that 'Prior Period Expenses' were not admissible expenses and therefore, he disallowed the same.
6. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"5.3. Apart from claiming that the prior period expenses were business expenses and had crystallized during the year no evidence to this effect was filed. Nature of these expenses is not known. In what manner were these incurred in the previous financial years and crystallized during the financial year relevant to assessment year 2008-09 too is not known. The plea of the appellant rests on the audit carried out by the C&AG. However, it must be borne in mind that the mandate and the scope of Audit of the C&AG is very different and an audit by the C&AG ipso facto does not declare an item of expenses as allowable under the Act.
5.4 The law regarding claim of expenses is clear. The onus is clearly on the appellant to show that the expenses were incurred and that they were revenue in nature while at the same time that they were laid out wholly and exclusively for the purpose of business. The burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction is on the assessee. The mere object of incurring expenditure is not decisive whether it is of a capital nature or revenue nature. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility of deduction is not in' the nature of capital expenditure. Further, mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same is proved to be paid for commercial consideration. The onus of proof is always upon the assessee. It cannot be said that even if the taxpayer does not produce any evidence in support of the claim for deduction, the Assessing Officer himself independently is to collect and decide that the deduction claimed is allowable having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. But, whether an assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which he might take of his rights. At the same time, the o.nus is on the assessee to establish that there are facts in existence which entitle it to a deduction and it is for the assessee to adduce necessary evidence in this regard. Therefore, if the assessee fails to place sufficient materials, he is not entitled to claim allowance under section 37(1).The position is well-settled by the judgments of the Apex Court in CIT v. Calcutta Agency Ltd.
Pa g e | 3 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 [1951] 19 ITR 191 and CIT v. Imperial Chemical Industries (I) (P.) Ltd. [1969] 74ITR 17.
5.5 Accordingly, it is held that the Ld. Assessing Officer had correctly made a disallowance of the amount. Ground of appeal is dismissed."
7. We have heard both the parties and perused the material available on record. We note that prior period expenses have crystallized in the respective assessment years. These expenses has not been allowed based on accrual concept in the previous year. When the existence of these expenses and crystallization of these expenses happened in the respective assessment years, then these expenses should be allowed. Since these expenses have crystallized in the assessment year under consideration, hence we allow the claim of the assessee, in the respective assessment years as mentioned in summarized ground no. 3 of the order.
8. Ground no. 2 raised by the assessee in I.T.A. No. 339/Ran/2017 for assessment year 2010-11 reads as under:
2. For that income returned by the appellant was Rs. 19,87,46,018/- as such, the ld. A.O. was not initiated for computing income at Rs.
25,15,36,880/- 'income submitted by appellant'. This is factually incorrect and net income after considering all out going was Rs. 19,87,46,018/- income disclosed in the return filed.
9. We have heard both the parties and perused the material available on record. We note that the grievance of the assessee was that income returned by the assessee was to the tune of Rs. 19,87,46,018/- whereas the Assessing Officer initiated for computation of income at Rs. 25,15,36,880/-. We note that as per assessee it is factually incorrect and net income after considering all outgoing was to the tune of Rs. 19,87,46,018/-, that the income disclosed in the return filed by the assessee. We are of the view that this issue needs to be verified by the Assessing Officer therefore we think it fit and appropriate to remit this issue to the file of Assessing Officer for his necessary verification and adjudicate the issue in accordance with law. Therefore we allow this ground of the assessee for statistical purposes.
Pa g e | 4 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
10. Ground no. 3 raised by the assessee in I.T.A. No. 340/Ran/2017 for assessment year 2011-12, the ld. CIT(A) estimated gross profit @ 20% whereas the assessee shown profit @ 19.5% in his books of accounts.
Ground raised by the assessee in I.T.A. No. 341/Ran/2017 for assessment year 2012-13, the ld. CIT(A) estimated gross profit 8% whereas the assessee shown profit @ 7.5%.
In I.T.A. No. 342/Ran/2017 for assessment year 2013-14 the ld. CIT(A) estimated gross profit @ 8% whereas assessee shown gross profit @ 1.13%.
11. We note these three ground relate to estimated gross profit therefore we take lead case of assessee's appeal in I.T.A. No. 340/Ran/2017 for assessment year 2011-12.
12. Brief facts qua the issue are that the appellant which is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the assessee was not able to produce books of accounts. The ld. Assessing Officer has noted that the assessee was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The ld. Assessing Officer, accordingly rejected the books of accounts of the assessee and in place of profit of 19.5% shown by the assessee on a turnover of Rs. 1,05,97,00,000/- estimated the profit @ 20% thereby making an addition of Rs. 71,40,000/- to the income of the assessee. Total income was assessed at Rs. 21,19,40,000/-. As regards the addition made by the Assessing Officer the assessee has stated that the assessee is a 100 percent Jharkhand Government owned company and was doing business of mining of coal and other major and minor minerals with an intention to develop mining of minerals which may not be profitable. Assessee had disclosed total receipts of Rs. 1,05,97,00,000/- on which net profit of Rs. 20,48,00,000/- was disclosed. The accounts of the appellant were not audited by CAG even though statutory audit was completed on the basis of which return of income was filed disclosing income computed as per statutory audit. No audited profit and loss account or balance Pa g e | 5 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 sheet was filed. However, details of sales in quantity and in value with gross profit and net profit earned was shown as per provisional project wise profit and loss account. The Ld. Assessing Officer made an estimate of net profit at 20% on total sales disclosed as per Profit and loss account thereby an addition of Rs. 71,40,000/- was made. The Appellant disputed this addition on the ground that verifiable books of account were maintained and were audited by statutory auditors and also by CAG although audit of CAG was not completed till the return was filed. The Ld. Assessing Officer, in the assessment order has noted that the assessee did not file its return of income. Accordingly, notice u/s.148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the appellant was not able to produce books of accounts. The Ld. Assessing Officer has noted that the appellant was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The Ld. Assessing Officer, accordingly rejected the books of accounts of the appellant and in place of profit of 19.5% shown by the appellant on a turnover of Rs. 1,05,97,00,000/- estimated the profit @20% thereby making an addition of Rs. 71,40,000/- to the income of the appellant. Total income was assessed at Rs. 2l, 19,40,000/-.
13. Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"Under the circumstances, the ld. Assessing Officer was justified in rejecting the profits as shown by the assessee and applying profit of 20%. It must also be noted that the enhancement of profit is only by half a percentage point which cannot be called as excessive and arbitrary. It is true that in estimating profits there would be some element of guess work. In CST v. H.M. Esufali, H, M. Abdulali [1973] 90 ITR 271 , the Supreme Court observed that it is inevitable that there is some guess work while making the best judgment assessment. The Assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rational base, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the Assessing authority is the best judge of the situation. It is his best judgment and not any one else's. As would be seen from the above judgment, the only issues which the ld. Assessing Officer needs to cover while making a best judgment are that there needs to be a rational basis and the estimation should not be vindictive or capricious. The fact that the books of accounts were not produced by the assessee and the assessee was unable to justify its return, the rejection of books of accounts and estimation of profit by enhancing the same by half a Pa g e | 6 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 percentage point meets all the conditions as mandated by the Apex court in the above referred judgment".
14. We have heard both the parties and perused the material available on record. We note that since assessee's books are audited, the Assessing Officer did not find any mistake in assessee's books. Books of accounts are audited. Assessee is a govt. owned company its accounts are subject to CAG audit therefore profit estimated by ld. CIT(A) at higher rate than what is declared by assessee is not acceptable. Therefore, we accept the gross profit rate declared by the assessee in A.Y. 2011-12 @ 19.5% in A.Y. 2012-13 @ 7.5% and in A.Y. 2013-14 @ 1.13%.
15. . In the result, all the appeals of the assessee is allowed.
Order pronounced in the Court on 15.03.2019
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 15/03/2019
(SB, Sr.PS)
Copy of the order forwarded to:
1. M/s Jharkhand State Minerals Development Corporation
2. DCIT, Circle-1, Ranchi
3. C.I.T(A)- 4. C.I.T.- Ranchi
5. CIT(DR), Ranchi Bench, Ranchi .
6. Guard File.
True copy By Order Assistant Registrar ITAT, Ranchi Bench Pa g e | 7 IN THE INCOME TAX APPELLATE TRIBUNAL "RANCHI", BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA Nos.337 to 342/Ran/2017 ( नधा रणवष / Assessment Years: 2008-09 to 2013-14) M/s Jharkhand State Minerals Vs. DCIT, Circle-1, Ranchi Development Corporation Nepal House Area, Doranda, Ranchi-
834002.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AABCJ 2578 C (Assessee) .. (Revenue) Assessee by : Shri Devesh Poddar, Advocate Respondent by : Shri P.K. Mondal, JCIT सन ु वाईक तार ख/ Date of Hearing : 11/01/2019 घोषणाक तार ख/Date of Pronouncement : 15/03/2019 आदे श / O R D E R Per Bench:
The captioned six appeals filed by the Assessee, pertaining to assessment years 2008-09 to 2013-14 respectively are directed against the separate orders passed by the Commissioner of Income Tax (Appeal)-Ranchi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short the Act).
2. Since these six appeals filed by the assessee contained common and identical issues therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
3. In these appeals , however the assessee have raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee are concised and summarized as follows:
I) The ld. CIT(A) erred in disallowing the prior period expenses the details of which are as follows:
a) I.T.A. No. 337/Ran/2017 for assessment year 2008-09 Prior Period Expenses of Rs. 89,98,315/-
b) I.T.A No. 338/Ran/2017 for assessment year 2009-10 Prior Period Expenses of Rs. 3,65,17,347/-
c) I.T.A. No. 339/Ran/2017 for assessment year 2010-11 Prior Period Expenses of Rs. 21,45,003/-
For these prior period expenses we take assessee's appeal in I.T.A. No. 337/Ran/2017 for assessment year 2008-09 as a lead case.
4. Brief facts qua the issue are that the assessee is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the ld. Assessing Officer has noted that the assessee had debited a sum of Rs. 89,98,315/- under the head 'Prior Period Expenses'. The ld. Assessing Officer held that these expenses is non- admissible and added the same to the income of the assessee.
5. During the assessment proceedings, the assessee submitted before the A.O. that prior period expenses were admissible expenditure however in the mercantile system of accounting it has to be brought on record that the expenditure was crystallized during the year under consideration and the appellant was not aware of its liability for expenses to provide for the same in the relevant accounting period. It was submitted that the assessee is a company in control of state of Jharkhand for development of minor and major minerals and assessee derives income mainly from coal mines allotted to the assessee by Jharkhand Government. There were many expenses which were not known or not ascertained during the year under Pa g e | 2 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 consideration, as such, they could not be provided. As the expenses were crystallized , same were provided and claimed as prior period expenses. The expenses incurred were fully verifiable and was examined by Internal Auditor, by Statutory Auditor and by CAG being the public sector undertaking. The ld. Assessing Officer was therefore not justified in making the disallowance. However The ld. Assessing Officer rejected the contention of the assessee and has held that 'Prior Period Expenses' were not admissible expenses and therefore, he disallowed the same.
6. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"5.3. Apart from claiming that the prior period expenses were business expenses and had crystallized during the year no evidence to this effect was filed. Nature of these expenses is not known. In what manner were these incurred in the previous financial years and crystallized during the financial year relevant to assessment year 2008-09 too is not known. The plea of the appellant rests on the audit carried out by the C&AG. However, it must be borne in mind that the mandate and the scope of Audit of the C&AG is very different and an audit by the C&AG ipso facto does not declare an item of expenses as allowable under the Act.
5.4 The law regarding claim of expenses is clear. The onus is clearly on the appellant to show that the expenses were incurred and that they were revenue in nature while at the same time that they were laid out wholly and exclusively for the purpose of business. The burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction is on the assessee. The mere object of incurring expenditure is not decisive whether it is of a capital nature or revenue nature. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility of deduction is not in' the nature of capital expenditure. Further, mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same is proved to be paid for commercial consideration. The onus of proof is always upon the assessee. It cannot be said that even if the taxpayer does not produce any evidence in support of the claim for deduction, the Assessing Officer himself independently is to collect and decide that the deduction claimed is allowable having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. But, whether an assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which he might take of his rights. At the same time, the o.nus is on the assessee to establish that there are facts in existence which entitle it to a deduction and it is for the assessee to adduce necessary evidence in this regard. Therefore, if the assessee fails to place sufficient materials, he is not entitled to claim allowance under section 37(1).The position is well-settled by the judgments of the Apex Court in CIT v. Calcutta Agency Ltd.
Pa g e | 3 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 [1951] 19 ITR 191 and CIT v. Imperial Chemical Industries (I) (P.) Ltd. [1969] 74ITR 17.
5.5 Accordingly, it is held that the Ld. Assessing Officer had correctly made a disallowance of the amount. Ground of appeal is dismissed."
7. We have heard both the parties and perused the material available on record. We note that prior period expenses have crystallized in the respective assessment years. These expenses has not been allowed based on accrual concept in the previous year. When the existence of these expenses and crystallization of these expenses happened in the respective assessment years, then these expenses should be allowed. Since these expenses have crystallized in the assessment year under consideration, hence we allow the claim of the assessee, in the respective assessment years as mentioned in summarized ground no. 3 of the order.
8. Ground no. 2 raised by the assessee in I.T.A. No. 339/Ran/2017 for assessment year 2010-11 reads as under:
2. For that income returned by the appellant was Rs. 19,87,46,018/- as such, the ld. A.O. was not initiated for computing income at Rs.
25,15,36,880/- 'income submitted by appellant'. This is factually incorrect and net income after considering all out going was Rs. 19,87,46,018/- income disclosed in the return filed.
9. We have heard both the parties and perused the material available on record. We note that the grievance of the assessee was that income returned by the assessee was to the tune of Rs. 19,87,46,018/- whereas the Assessing Officer initiated for computation of income at Rs. 25,15,36,880/-. We note that as per assessee it is factually incorrect and net income after considering all outgoing was to the tune of Rs. 19,87,46,018/-, that the income disclosed in the return filed by the assessee. We are of the view that this issue needs to be verified by the Assessing Officer therefore we think it fit and appropriate to remit this issue to the file of Assessing Officer for his necessary verification and adjudicate the issue in accordance with law. Therefore we allow this ground of the assessee for statistical purposes.
Pa g e | 4 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
10. Ground no. 3 raised by the assessee in I.T.A. No. 340/Ran/2017 for assessment year 2011-12, the ld. CIT(A) estimated gross profit @ 20% whereas the assessee shown profit @ 19.5% in his books of accounts.
Ground raised by the assessee in I.T.A. No. 341/Ran/2017 for assessment year 2012-13, the ld. CIT(A) estimated gross profit 8% whereas the assessee shown profit @ 7.5%.
In I.T.A. No. 342/Ran/2017 for assessment year 2013-14 the ld. CIT(A) estimated gross profit @ 8% whereas assessee shown gross profit @ 1.13%.
11. We note these three ground relate to estimated gross profit therefore we take lead case of assessee's appeal in I.T.A. No. 340/Ran/2017 for assessment year 2011-12.
12. Brief facts qua the issue are that the appellant which is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the assessee was not able to produce books of accounts. The ld. Assessing Officer has noted that the assessee was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The ld. Assessing Officer, accordingly rejected the books of accounts of the assessee and in place of profit of 19.5% shown by the assessee on a turnover of Rs. 1,05,97,00,000/- estimated the profit @ 20% thereby making an addition of Rs. 71,40,000/- to the income of the assessee. Total income was assessed at Rs. 21,19,40,000/-. As regards the addition made by the Assessing Officer the assessee has stated that the assessee is a 100 percent Jharkhand Government owned company and was doing business of mining of coal and other major and minor minerals with an intention to develop mining of minerals which may not be profitable. Assessee had disclosed total receipts of Rs. 1,05,97,00,000/- on which net profit of Rs. 20,48,00,000/- was disclosed. The accounts of the appellant were not audited by CAG even though statutory audit was completed on the basis of which return of income was filed disclosing income computed as per statutory audit. No audited profit and loss account or balance Pa g e | 5 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 sheet was filed. However, details of sales in quantity and in value with gross profit and net profit earned was shown as per provisional project wise profit and loss account. The Ld. Assessing Officer made an estimate of net profit at 20% on total sales disclosed as per Profit and loss account thereby an addition of Rs. 71,40,000/- was made. The Appellant disputed this addition on the ground that verifiable books of account were maintained and were audited by statutory auditors and also by CAG although audit of CAG was not completed till the return was filed. The Ld. Assessing Officer, in the assessment order has noted that the assessee did not file its return of income. Accordingly, notice u/s.148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the appellant was not able to produce books of accounts. The Ld. Assessing Officer has noted that the appellant was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The Ld. Assessing Officer, accordingly rejected the books of accounts of the appellant and in place of profit of 19.5% shown by the appellant on a turnover of Rs. 1,05,97,00,000/- estimated the profit @20% thereby making an addition of Rs. 71,40,000/- to the income of the appellant. Total income was assessed at Rs. 2l, 19,40,000/-.
13. Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"Under the circumstances, the ld. Assessing Officer was justified in rejecting the profits as shown by the assessee and applying profit of 20%. It must also be noted that the enhancement of profit is only by half a percentage point which cannot be called as excessive and arbitrary. It is true that in estimating profits there would be some element of guess work. In CST v. H.M. Esufali, H, M. Abdulali [1973] 90 ITR 271 , the Supreme Court observed that it is inevitable that there is some guess work while making the best judgment assessment. The Assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rational base, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the Assessing authority is the best judge of the situation. It is his best judgment and not any one else's. As would be seen from the above judgment, the only issues which the ld. Assessing Officer needs to cover while making a best judgment are that there needs to be a rational basis and the estimation should not be vindictive or capricious. The fact that the books of accounts were not produced by the assessee and the assessee was unable to justify its return, the rejection of books of accounts and estimation of profit by enhancing the same by half a Pa g e | 6 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 percentage point meets all the conditions as mandated by the Apex court in the above referred judgment".
14. We have heard both the parties and perused the material available on record. We note that since assessee's books are audited, the Assessing Officer did not find any mistake in assessee's books. Books of accounts are audited. Assessee is a govt. owned company its accounts are subject to CAG audit therefore profit estimated by ld. CIT(A) at higher rate than what is declared by assessee is not acceptable. Therefore, we accept the gross profit rate declared by the assessee in A.Y. 2011-12 @ 19.5% in A.Y. 2012-13 @ 7.5% and in A.Y. 2013-14 @ 1.13%.
15. . In the result, all the appeals of the assessee is allowed.
Order pronounced in the Court on 15.03.2019
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 15/03/2019
(SB, Sr.PS)
Copy of the order forwarded to:
1. M/s Jharkhand State Minerals Development Corporation
2. DCIT, Circle-1, Ranchi
3. C.I.T(A)- 4. C.I.T.- Ranchi
5. CIT(DR), Ranchi Bench, Ranchi .
6. Guard File.
True copy By Order Assistant Registrar ITAT, Ranchi Bench Pa g e | 7 IN THE INCOME TAX APPELLATE TRIBUNAL "RANCHI", BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA Nos.337 to 342/Ran/2017 ( नधा रणवष / Assessment Years: 2008-09 to 2013-14) M/s Jharkhand State Minerals Vs. DCIT, Circle-1, Ranchi Development Corporation Nepal House Area, Doranda, Ranchi-
834002.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AABCJ 2578 C (Assessee) .. (Revenue) Assessee by : Shri Devesh Poddar, Advocate Respondent by : Shri P.K. Mondal, JCIT सन ु वाईक तार ख/ Date of Hearing : 11/01/2019 घोषणाक तार ख/Date of Pronouncement : 15/03/2019 आदे श / O R D E R Per Bench:
The captioned six appeals filed by the Assessee, pertaining to assessment years 2008-09 to 2013-14 respectively are directed against the separate orders passed by the Commissioner of Income Tax (Appeal)-Ranchi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short the Act).
2. Since these six appeals filed by the assessee contained common and identical issues therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
3. In these appeals , however the assessee have raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee are concised and summarized as follows:
I) The ld. CIT(A) erred in disallowing the prior period expenses the details of which are as follows:
a) I.T.A. No. 337/Ran/2017 for assessment year 2008-09 Prior Period Expenses of Rs. 89,98,315/-
b) I.T.A No. 338/Ran/2017 for assessment year 2009-10 Prior Period Expenses of Rs. 3,65,17,347/-
c) I.T.A. No. 339/Ran/2017 for assessment year 2010-11 Prior Period Expenses of Rs. 21,45,003/-
For these prior period expenses we take assessee's appeal in I.T.A. No. 337/Ran/2017 for assessment year 2008-09 as a lead case.
4. Brief facts qua the issue are that the assessee is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the ld. Assessing Officer has noted that the assessee had debited a sum of Rs. 89,98,315/- under the head 'Prior Period Expenses'. The ld. Assessing Officer held that these expenses is non- admissible and added the same to the income of the assessee.
5. During the assessment proceedings, the assessee submitted before the A.O. that prior period expenses were admissible expenditure however in the mercantile system of accounting it has to be brought on record that the expenditure was crystallized during the year under consideration and the appellant was not aware of its liability for expenses to provide for the same in the relevant accounting period. It was submitted that the assessee is a company in control of state of Jharkhand for development of minor and major minerals and assessee derives income mainly from coal mines allotted to the assessee by Jharkhand Government. There were many expenses which were not known or not ascertained during the year under Pa g e | 2 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 consideration, as such, they could not be provided. As the expenses were crystallized , same were provided and claimed as prior period expenses. The expenses incurred were fully verifiable and was examined by Internal Auditor, by Statutory Auditor and by CAG being the public sector undertaking. The ld. Assessing Officer was therefore not justified in making the disallowance. However The ld. Assessing Officer rejected the contention of the assessee and has held that 'Prior Period Expenses' were not admissible expenses and therefore, he disallowed the same.
6. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"5.3. Apart from claiming that the prior period expenses were business expenses and had crystallized during the year no evidence to this effect was filed. Nature of these expenses is not known. In what manner were these incurred in the previous financial years and crystallized during the financial year relevant to assessment year 2008-09 too is not known. The plea of the appellant rests on the audit carried out by the C&AG. However, it must be borne in mind that the mandate and the scope of Audit of the C&AG is very different and an audit by the C&AG ipso facto does not declare an item of expenses as allowable under the Act.
5.4 The law regarding claim of expenses is clear. The onus is clearly on the appellant to show that the expenses were incurred and that they were revenue in nature while at the same time that they were laid out wholly and exclusively for the purpose of business. The burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction is on the assessee. The mere object of incurring expenditure is not decisive whether it is of a capital nature or revenue nature. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility of deduction is not in' the nature of capital expenditure. Further, mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same is proved to be paid for commercial consideration. The onus of proof is always upon the assessee. It cannot be said that even if the taxpayer does not produce any evidence in support of the claim for deduction, the Assessing Officer himself independently is to collect and decide that the deduction claimed is allowable having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. But, whether an assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which he might take of his rights. At the same time, the o.nus is on the assessee to establish that there are facts in existence which entitle it to a deduction and it is for the assessee to adduce necessary evidence in this regard. Therefore, if the assessee fails to place sufficient materials, he is not entitled to claim allowance under section 37(1).The position is well-settled by the judgments of the Apex Court in CIT v. Calcutta Agency Ltd.
Pa g e | 3 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 [1951] 19 ITR 191 and CIT v. Imperial Chemical Industries (I) (P.) Ltd. [1969] 74ITR 17.
5.5 Accordingly, it is held that the Ld. Assessing Officer had correctly made a disallowance of the amount. Ground of appeal is dismissed."
7. We have heard both the parties and perused the material available on record. We note that prior period expenses have crystallized in the respective assessment years. These expenses has not been allowed based on accrual concept in the previous year. When the existence of these expenses and crystallization of these expenses happened in the respective assessment years, then these expenses should be allowed. Since these expenses have crystallized in the assessment year under consideration, hence we allow the claim of the assessee, in the respective assessment years as mentioned in summarized ground no. 3 of the order.
8. Ground no. 2 raised by the assessee in I.T.A. No. 339/Ran/2017 for assessment year 2010-11 reads as under:
2. For that income returned by the appellant was Rs. 19,87,46,018/- as such, the ld. A.O. was not initiated for computing income at Rs.
25,15,36,880/- 'income submitted by appellant'. This is factually incorrect and net income after considering all out going was Rs. 19,87,46,018/- income disclosed in the return filed.
9. We have heard both the parties and perused the material available on record. We note that the grievance of the assessee was that income returned by the assessee was to the tune of Rs. 19,87,46,018/- whereas the Assessing Officer initiated for computation of income at Rs. 25,15,36,880/-. We note that as per assessee it is factually incorrect and net income after considering all outgoing was to the tune of Rs. 19,87,46,018/-, that the income disclosed in the return filed by the assessee. We are of the view that this issue needs to be verified by the Assessing Officer therefore we think it fit and appropriate to remit this issue to the file of Assessing Officer for his necessary verification and adjudicate the issue in accordance with law. Therefore we allow this ground of the assessee for statistical purposes.
Pa g e | 4 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
10. Ground no. 3 raised by the assessee in I.T.A. No. 340/Ran/2017 for assessment year 2011-12, the ld. CIT(A) estimated gross profit @ 20% whereas the assessee shown profit @ 19.5% in his books of accounts.
Ground raised by the assessee in I.T.A. No. 341/Ran/2017 for assessment year 2012-13, the ld. CIT(A) estimated gross profit 8% whereas the assessee shown profit @ 7.5%.
In I.T.A. No. 342/Ran/2017 for assessment year 2013-14 the ld. CIT(A) estimated gross profit @ 8% whereas assessee shown gross profit @ 1.13%.
11. We note these three ground relate to estimated gross profit therefore we take lead case of assessee's appeal in I.T.A. No. 340/Ran/2017 for assessment year 2011-12.
12. Brief facts qua the issue are that the appellant which is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the assessee was not able to produce books of accounts. The ld. Assessing Officer has noted that the assessee was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The ld. Assessing Officer, accordingly rejected the books of accounts of the assessee and in place of profit of 19.5% shown by the assessee on a turnover of Rs. 1,05,97,00,000/- estimated the profit @ 20% thereby making an addition of Rs. 71,40,000/- to the income of the assessee. Total income was assessed at Rs. 21,19,40,000/-. As regards the addition made by the Assessing Officer the assessee has stated that the assessee is a 100 percent Jharkhand Government owned company and was doing business of mining of coal and other major and minor minerals with an intention to develop mining of minerals which may not be profitable. Assessee had disclosed total receipts of Rs. 1,05,97,00,000/- on which net profit of Rs. 20,48,00,000/- was disclosed. The accounts of the appellant were not audited by CAG even though statutory audit was completed on the basis of which return of income was filed disclosing income computed as per statutory audit. No audited profit and loss account or balance Pa g e | 5 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 sheet was filed. However, details of sales in quantity and in value with gross profit and net profit earned was shown as per provisional project wise profit and loss account. The Ld. Assessing Officer made an estimate of net profit at 20% on total sales disclosed as per Profit and loss account thereby an addition of Rs. 71,40,000/- was made. The Appellant disputed this addition on the ground that verifiable books of account were maintained and were audited by statutory auditors and also by CAG although audit of CAG was not completed till the return was filed. The Ld. Assessing Officer, in the assessment order has noted that the assessee did not file its return of income. Accordingly, notice u/s.148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the appellant was not able to produce books of accounts. The Ld. Assessing Officer has noted that the appellant was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The Ld. Assessing Officer, accordingly rejected the books of accounts of the appellant and in place of profit of 19.5% shown by the appellant on a turnover of Rs. 1,05,97,00,000/- estimated the profit @20% thereby making an addition of Rs. 71,40,000/- to the income of the appellant. Total income was assessed at Rs. 2l, 19,40,000/-.
13. Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"Under the circumstances, the ld. Assessing Officer was justified in rejecting the profits as shown by the assessee and applying profit of 20%. It must also be noted that the enhancement of profit is only by half a percentage point which cannot be called as excessive and arbitrary. It is true that in estimating profits there would be some element of guess work. In CST v. H.M. Esufali, H, M. Abdulali [1973] 90 ITR 271 , the Supreme Court observed that it is inevitable that there is some guess work while making the best judgment assessment. The Assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rational base, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the Assessing authority is the best judge of the situation. It is his best judgment and not any one else's. As would be seen from the above judgment, the only issues which the ld. Assessing Officer needs to cover while making a best judgment are that there needs to be a rational basis and the estimation should not be vindictive or capricious. The fact that the books of accounts were not produced by the assessee and the assessee was unable to justify its return, the rejection of books of accounts and estimation of profit by enhancing the same by half a Pa g e | 6 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 percentage point meets all the conditions as mandated by the Apex court in the above referred judgment".
14. We have heard both the parties and perused the material available on record. We note that since assessee's books are audited, the Assessing Officer did not find any mistake in assessee's books. Books of accounts are audited. Assessee is a govt. owned company its accounts are subject to CAG audit therefore profit estimated by ld. CIT(A) at higher rate than what is declared by assessee is not acceptable. Therefore, we accept the gross profit rate declared by the assessee in A.Y. 2011-12 @ 19.5% in A.Y. 2012-13 @ 7.5% and in A.Y. 2013-14 @ 1.13%.
15. . In the result, all the appeals of the assessee is allowed.
Order pronounced in the Court on 15.03.2019
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 15/03/2019
(SB, Sr.PS)
Copy of the order forwarded to:
1. M/s Jharkhand State Minerals Development Corporation
2. DCIT, Circle-1, Ranchi
3. C.I.T(A)- 4. C.I.T.- Ranchi
5. CIT(DR), Ranchi Bench, Ranchi .
6. Guard File.
True copy By Order Assistant Registrar ITAT, Ranchi Bench Pa g e | 7 IN THE INCOME TAX APPELLATE TRIBUNAL "RANCHI", BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA Nos.337 to 342/Ran/2017 ( नधा रणवष / Assessment Years: 2008-09 to 2013-14) M/s Jharkhand State Minerals Vs. DCIT, Circle-1, Ranchi Development Corporation Nepal House Area, Doranda, Ranchi-
834002.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AABCJ 2578 C (Assessee) .. (Revenue) Assessee by : Shri Devesh Poddar, Advocate Respondent by : Shri P.K. Mondal, JCIT सन ु वाईक तार ख/ Date of Hearing : 11/01/2019 घोषणाक तार ख/Date of Pronouncement : 15/03/2019 आदे श / O R D E R Per Bench:
The captioned six appeals filed by the Assessee, pertaining to assessment years 2008-09 to 2013-14 respectively are directed against the separate orders passed by the Commissioner of Income Tax (Appeal)-Ranchi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short the Act).
2. Since these six appeals filed by the assessee contained common and identical issues therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
3. In these appeals , however the assessee have raised multiple grounds of appeal, but at the time of hearing the main grievance of the assessee are concised and summarized as follows:
I) The ld. CIT(A) erred in disallowing the prior period expenses the details of which are as follows:
a) I.T.A. No. 337/Ran/2017 for assessment year 2008-09 Prior Period Expenses of Rs. 89,98,315/-
b) I.T.A No. 338/Ran/2017 for assessment year 2009-10 Prior Period Expenses of Rs. 3,65,17,347/-
c) I.T.A. No. 339/Ran/2017 for assessment year 2010-11 Prior Period Expenses of Rs. 21,45,003/-
For these prior period expenses we take assessee's appeal in I.T.A. No. 337/Ran/2017 for assessment year 2008-09 as a lead case.
4. Brief facts qua the issue are that the assessee is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the ld. Assessing Officer has noted that the assessee had debited a sum of Rs. 89,98,315/- under the head 'Prior Period Expenses'. The ld. Assessing Officer held that these expenses is non- admissible and added the same to the income of the assessee.
5. During the assessment proceedings, the assessee submitted before the A.O. that prior period expenses were admissible expenditure however in the mercantile system of accounting it has to be brought on record that the expenditure was crystallized during the year under consideration and the appellant was not aware of its liability for expenses to provide for the same in the relevant accounting period. It was submitted that the assessee is a company in control of state of Jharkhand for development of minor and major minerals and assessee derives income mainly from coal mines allotted to the assessee by Jharkhand Government. There were many expenses which were not known or not ascertained during the year under Pa g e | 2 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 consideration, as such, they could not be provided. As the expenses were crystallized , same were provided and claimed as prior period expenses. The expenses incurred were fully verifiable and was examined by Internal Auditor, by Statutory Auditor and by CAG being the public sector undertaking. The ld. Assessing Officer was therefore not justified in making the disallowance. However The ld. Assessing Officer rejected the contention of the assessee and has held that 'Prior Period Expenses' were not admissible expenses and therefore, he disallowed the same.
6. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"5.3. Apart from claiming that the prior period expenses were business expenses and had crystallized during the year no evidence to this effect was filed. Nature of these expenses is not known. In what manner were these incurred in the previous financial years and crystallized during the financial year relevant to assessment year 2008-09 too is not known. The plea of the appellant rests on the audit carried out by the C&AG. However, it must be borne in mind that the mandate and the scope of Audit of the C&AG is very different and an audit by the C&AG ipso facto does not declare an item of expenses as allowable under the Act.
5.4 The law regarding claim of expenses is clear. The onus is clearly on the appellant to show that the expenses were incurred and that they were revenue in nature while at the same time that they were laid out wholly and exclusively for the purpose of business. The burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for the purpose of business so that the assessee may be entitled to claim deduction is on the assessee. The mere object of incurring expenditure is not decisive whether it is of a capital nature or revenue nature. Therefore, the onus is on the assessee to prove, inter alia, that the item of expenditure in question for admissibility of deduction is not in' the nature of capital expenditure. Further, mere payment by itself would not entitle the assessee to deduction of the said expenditure unless the same is proved to be paid for commercial consideration. The onus of proof is always upon the assessee. It cannot be said that even if the taxpayer does not produce any evidence in support of the claim for deduction, the Assessing Officer himself independently is to collect and decide that the deduction claimed is allowable having regard to the legitimate business needs of the assessee. It is for the taxpayer to establish by evidence that a particular allowance is justified. But, whether an assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which he might take of his rights. At the same time, the o.nus is on the assessee to establish that there are facts in existence which entitle it to a deduction and it is for the assessee to adduce necessary evidence in this regard. Therefore, if the assessee fails to place sufficient materials, he is not entitled to claim allowance under section 37(1).The position is well-settled by the judgments of the Apex Court in CIT v. Calcutta Agency Ltd.
Pa g e | 3 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 [1951] 19 ITR 191 and CIT v. Imperial Chemical Industries (I) (P.) Ltd. [1969] 74ITR 17.
5.5 Accordingly, it is held that the Ld. Assessing Officer had correctly made a disallowance of the amount. Ground of appeal is dismissed."
7. We have heard both the parties and perused the material available on record. We note that prior period expenses have crystallized in the respective assessment years. These expenses has not been allowed based on accrual concept in the previous year. When the existence of these expenses and crystallization of these expenses happened in the respective assessment years, then these expenses should be allowed. Since these expenses have crystallized in the assessment year under consideration, hence we allow the claim of the assessee, in the respective assessment years as mentioned in summarized ground no. 3 of the order.
8. Ground no. 2 raised by the assessee in I.T.A. No. 339/Ran/2017 for assessment year 2010-11 reads as under:
2. For that income returned by the appellant was Rs. 19,87,46,018/- as such, the ld. A.O. was not initiated for computing income at Rs.
25,15,36,880/- 'income submitted by appellant'. This is factually incorrect and net income after considering all out going was Rs. 19,87,46,018/- income disclosed in the return filed.
9. We have heard both the parties and perused the material available on record. We note that the grievance of the assessee was that income returned by the assessee was to the tune of Rs. 19,87,46,018/- whereas the Assessing Officer initiated for computation of income at Rs. 25,15,36,880/-. We note that as per assessee it is factually incorrect and net income after considering all outgoing was to the tune of Rs. 19,87,46,018/-, that the income disclosed in the return filed by the assessee. We are of the view that this issue needs to be verified by the Assessing Officer therefore we think it fit and appropriate to remit this issue to the file of Assessing Officer for his necessary verification and adjudicate the issue in accordance with law. Therefore we allow this ground of the assessee for statistical purposes.
Pa g e | 4 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14
10. Ground no. 3 raised by the assessee in I.T.A. No. 340/Ran/2017 for assessment year 2011-12, the ld. CIT(A) estimated gross profit @ 20% whereas the assessee shown profit @ 19.5% in his books of accounts.
Ground raised by the assessee in I.T.A. No. 341/Ran/2017 for assessment year 2012-13, the ld. CIT(A) estimated gross profit 8% whereas the assessee shown profit @ 7.5%.
In I.T.A. No. 342/Ran/2017 for assessment year 2013-14 the ld. CIT(A) estimated gross profit @ 8% whereas assessee shown gross profit @ 1.13%.
11. We note these three ground relate to estimated gross profit therefore we take lead case of assessee's appeal in I.T.A. No. 340/Ran/2017 for assessment year 2011-12.
12. Brief facts qua the issue are that the appellant which is a State Public Sector Undertaking (SPSU) engaged in the business of mining work, did not file its return of income. Accordingly, notice u/s 148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the assessee was not able to produce books of accounts. The ld. Assessing Officer has noted that the assessee was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The ld. Assessing Officer, accordingly rejected the books of accounts of the assessee and in place of profit of 19.5% shown by the assessee on a turnover of Rs. 1,05,97,00,000/- estimated the profit @ 20% thereby making an addition of Rs. 71,40,000/- to the income of the assessee. Total income was assessed at Rs. 21,19,40,000/-. As regards the addition made by the Assessing Officer the assessee has stated that the assessee is a 100 percent Jharkhand Government owned company and was doing business of mining of coal and other major and minor minerals with an intention to develop mining of minerals which may not be profitable. Assessee had disclosed total receipts of Rs. 1,05,97,00,000/- on which net profit of Rs. 20,48,00,000/- was disclosed. The accounts of the appellant were not audited by CAG even though statutory audit was completed on the basis of which return of income was filed disclosing income computed as per statutory audit. No audited profit and loss account or balance Pa g e | 5 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 sheet was filed. However, details of sales in quantity and in value with gross profit and net profit earned was shown as per provisional project wise profit and loss account. The Ld. Assessing Officer made an estimate of net profit at 20% on total sales disclosed as per Profit and loss account thereby an addition of Rs. 71,40,000/- was made. The Appellant disputed this addition on the ground that verifiable books of account were maintained and were audited by statutory auditors and also by CAG although audit of CAG was not completed till the return was filed. The Ld. Assessing Officer, in the assessment order has noted that the assessee did not file its return of income. Accordingly, notice u/s.148 of the Act was issued on 17.10.2014. During the course of the assessment proceedings the appellant was not able to produce books of accounts. The Ld. Assessing Officer has noted that the appellant was not able to submit any other details as no statutory Audit as mandated under the Act was conducted. The Ld. Assessing Officer, accordingly rejected the books of accounts of the appellant and in place of profit of 19.5% shown by the appellant on a turnover of Rs. 1,05,97,00,000/- estimated the profit @20% thereby making an addition of Rs. 71,40,000/- to the income of the appellant. Total income was assessed at Rs. 2l, 19,40,000/-.
13. Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
"Under the circumstances, the ld. Assessing Officer was justified in rejecting the profits as shown by the assessee and applying profit of 20%. It must also be noted that the enhancement of profit is only by half a percentage point which cannot be called as excessive and arbitrary. It is true that in estimating profits there would be some element of guess work. In CST v. H.M. Esufali, H, M. Abdulali [1973] 90 ITR 271 , the Supreme Court observed that it is inevitable that there is some guess work while making the best judgment assessment. The Assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rational base, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the Assessing authority is the best judge of the situation. It is his best judgment and not any one else's. As would be seen from the above judgment, the only issues which the ld. Assessing Officer needs to cover while making a best judgment are that there needs to be a rational basis and the estimation should not be vindictive or capricious. The fact that the books of accounts were not produced by the assessee and the assessee was unable to justify its return, the rejection of books of accounts and estimation of profit by enhancing the same by half a Pa g e | 6 M/s Jharkhand State Minerals Development Corporation ITA Nos.337 to 342/Ran/2017 Assessment Years:2008-09 to 2013-14 percentage point meets all the conditions as mandated by the Apex court in the above referred judgment".
14. We have heard both the parties and perused the material available on record. We note that since assessee's books are audited, the Assessing Officer did not find any mistake in assessee's books. Books of accounts are audited. Assessee is a govt. owned company its accounts are subject to CAG audit therefore profit estimated by ld. CIT(A) at higher rate than what is declared by assessee is not acceptable. Therefore, we accept the gross profit rate declared by the assessee in A.Y. 2011-12 @ 19.5% in A.Y. 2012-13 @ 7.5% and in A.Y. 2013-14 @ 1.13%.
15. . In the result, all the appeals of the assessee is allowed.
Order pronounced in the Court on 15.03.2019
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 15/03/2019
(SB, Sr.PS)
Copy of the order forwarded to:
1. M/s Jharkhand State Minerals Development Corporation
2. DCIT, Circle-1, Ranchi
3. C.I.T(A)- 4. C.I.T.- Ranchi
5. CIT(DR), Ranchi Bench, Ranchi .
6. Guard File.
True copy By Order Assistant Registrar ITAT, Ranchi Bench Pa g e | 7