M/S. MAA TARINI MINERALS PVT. LTD.,ROURKELA vs. DCIT,CENTRAL CIRCLE, SAMBALPUR

आयकर अऩीऱीय अधधकरण, कटक न्यायऩीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आयकर अऩीऱ सं/ITA Nos.201-205/CTK/2023 (ननधाारण वषा / Assessment Year : 2014-2015 to 2019-2020) M/s Tarini Minerals Pvt. Ltd. Vs DCIT, Central Circle, Sambalpur A-6, Commercial Estate, Civil Township, Rourkela-769004 PAN No. :AAACT 6489 P (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. ननधााररती की ओर से /Assessee by : Shri S.C.Bhadra, CA राजस्व की ओर से /Revenue by : Shri Sanjay Kumar, CIT-DR सुनवाई की तारीख / Date of Hearing : 27/05/2024 घोषणा की तारीख/Date of Pronouncement : 27/05/2024 आदेश / O R D E R Per Bench : These are the appeals filed by the assessee against the separate orders of the ld. CIT(A)-2, Bhubaneswar, all dated 31.03.2023 in the following appeals :- I.T.Appeal No. Assessment Date of Arising out of year Order the order passed by the AO Bhubaneswar-2/10378/2013-14 2014-2015 31.03.2023 153A Bhubaneswar-2/10584/2014-15 2015-2016 31.03.2023 153A Bhubaneswar-2/10397/2015-16 2016-2017 31.03.2023 153A Bhubaneswar-2/11249/2017-18 2018-2019 31.03.2023 153A Bhubaneswar-2/10607/2018-19 2019-2020 31.03.2023 153A 2. In all the appeals, the assessee has raised the common grounds except difference in figures. Therefore, for the sake of convenience, the facts and grounds mentioned in the appeal of the assessee in ITA No.201/CTK/2023 for the A.Y.2014-2015 shall be taken into consideration

2 ITA Nos.201-205/CTK/2023 for deciding all the appeals. The grounds raised in the appeal for A.Y.2014-2015 are as under :- 1. The Learned Assessing Officer has made addition of RS.5,39,92,037.00, under the head Suppression of Sale, by treating Shyam Sel and Power Limited, as a related party. As per Sub-Rule (8), Rule 45 of Mineral Conservation and Development Rules 1988, which is reproduced in the Assessment Order, ex-mines sales, in case of domestic sale is defined in clause (b) of the said Rule. Accordingly, ex-mines sale means sale price of minerals recorded in the invoice, less the actual expenditure incurred towards loading, unloading transportation, other charges ect., beyond the mining site. In the case of the appellant, the learned Assessing Officer himself not followed the explanation to Rule - 45, of Mineral Conservation and Development Rule 1988. He proceeded to treat the Shyam Sel and Power Limited, as related party, when the said company neither hold any share in the company of appellant nor the appellant hold any share in Shyam Sel and Power Limited as per the explanation to Sub- Rule. The Assessing Officer preferred to take ex-mines sale value to Shyam Sel and Power Limited, and compared it to the sale value as per IBM rate and added the difference as suppression of the sale. It is apparent, that the Assessing Officer has himself deviated from the Rules to compute the ex;;.mines sale. 2. The Learned Commissioner of Income Tax (Appeals), after a detailed discussion, noted that as per Rule - 640 of Mineral Conservation and Development Rules 1988, IBM calculates state wise, mineral wise, month wise and an average sale price to ascertain the royalty payment. He also noted that as per Sub - Rule (8) of MC & 0 Rule 1988, the appellant is not related to Shyam Sel and Power Limited. He also agreed that the IBM price is not sacrosanct to compare and calculate suppression of sale. He asked to compare the sale price of Shyam Sel and Power Limited vis -a- vis sale price of other parities. As per MC & 0 Rule 1988, ex-mines sale, in case of domestic sale of minerals, it is sale price of the minerals recorded in the invoice as reduced by the actual expenditure incurred towards loading, unloading, transportation and other charges beyond the mining site. The Assessing Officer mentioned the ex-mines value which is purchase value from Indrani Patnaik and compared the same with IBM rate and the difference between the two taken as suppression of sale. The Learned Commissioner of Income Tax (Appeals), asked to compare ex-mines value with the sale value of other parties to find suppression of sale. In this process ex- mines value at purchase point is required to be added to the expenses for transportation ect., to find out the ex-mines value at appellant's end. At the time of hearing of the appeal, the sale value of the appellant was available but the expenses incurred for deduction from sale value was not available, immediately.

3 ITA Nos.201-205/CTK/2023 Transportation expenses including, loading unloading and other related expenses is around Rs.300.00 per MT. The Learned Commissioner of Income Tax (Appeals), in the absence of details of transport and other expenses, could not conclude sale suppression by comparing ex-mines value with other parties. He merely accepted the sale suppression, which was determined by the Assessing Officer, not as per Rules mentioned above. Moreover, when the Learned Commissioner of Income Tax (Appeals), himself noted that Shyam Sel and Power Limited Power and Steel Pvt. Ltd, is not a related party transaction and the IBM price is not sacrosanct, he should not have confirmed "sale suppression" as computed by the Assessing Officer, by taking IBM price and treating the buyer as related party. Therefore, the Assessing Officer as well as the Learned Commissioner of Income Tax (Appeals), are not correct to accept the suppression of sale of Rs. 5,39,92,037.00. 3. For these, among other reasons, to be argued at the time of hearing, the addition under the head Suppression of Sale, shall be deleted. 3. Brief facts of the case are that the assessee is a company and engaged in the business of mining and trading of Iron Ore from its mine, located at Deojhar. A search action u/s 132 was carried out by the department on 11.01.2019 at business premises of the assessee. Consequent upon the search proceedings were initiated by issue of notices u/s 153A of the Act for various assessment years falling under the block period and the assessments orders were passed u/s 153A r.w.s. 143(3) of the Act for all the assessment years by making various additions/ disallowances which includes the additions on account of suppression of sale. In first appeal, ld. CIT (A) allowed substantial relief to the assessee and only sustained the addition on account of suppression of sale for all the years and the amount of Rs. 17,86,243/- pertained to AY 2014-15.

4 ITA Nos.201-205/CTK/2023 4. During the course of hearing, ld. AR preliminary objected the completion of the assessments for AYrs. 2014-15 to 2016-17 u/s 153A by making various additions without referring to any incriminating material. In this regard ld.A/R submitted that though the facts in all the cases are identical, however, the assessment framed for the assessment years 2014-2015, 2015-2016 & 2016-2017 are abated years. It was the submission that there was a search on the premises of the assessee on 11.01.2019. Notice u/s.153A of the Act came to be issued on 30.12.2019. The return came to be filed in response to the notice u/s.153A of the Act on 15.01.2020. It was the submission that the original assessment in the case of the assessee for the assessment years 2014-2015, 2015-2016 & 2016-2017, came to be passed u/s.143(3) of the Act on 16.02.2018 & 29.10.2016, & 22.07.2017, respectively and no proceedings were pending at the time when the search was conducted on the assessee. It was the submission that the appeals before the Tribunal for the assessment years 2014-2015, 2015-2016 & 2016-2017 were in respect of the assessment years which have abated. It was the submission that the assessment orders in the above assessment years were passed u/s.153A of the Act, the AO has not relied upon any incriminating material but the assessments are on the basis of record already available. It was the submission that as no incriminating material had been found in the course of search on the assessee, no additions could be made in the case of the assessee for any of the three assessment years when no reference is made to the incriminating material for any of the assessment years. For

5 ITA Nos.201-205/CTK/2023 this proposition, ld. AR placed reliance on the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd., reported in [2023] 454 ITR 212 (SC), wherein the Hon’ble Supreme Court in para 11 has held as follows :- 11. As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of

6 ITA Nos.201-205/CTK/2023 the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 5. Further, the Hon’ble Supreme Court in para 14 has held as follows:- 14. In view of the above and for the reasons stated above, it is concluded as under:

(i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.

7 ITA Nos.201-205/CTK/2023 legal basis”. It was the submission that in the case of assessee, as no incriminating documents were unearthed during the course of search or has been referred to or relied upon, the assessment orders were liable to be quashed as the AO did not have the power to assume the jurisdiction u/s.153A of the Act for the relevant four assessment years. 7. In reply, the ld. CIT-DR vehemently supported the order of AO and CIT(A). 8. We have considered the rival submissions. A perusal of the assessment orders for the assessment years 2014-2015, 2015-2016 & 2016-2017 clearly shows that the AO has not referred to any documents found in the course of search, incriminating or otherwise. This being so, in view of the principles laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra) as also the decision of the Hon’ble Jurisdictional High Court of Orissa in the case of Smt. Jami Nirmala (supra), as no incriminating material has been found in the course of search in the case of the assessee pertaining to these three assessment years, no addition could be made in the assessment framed u/s.153A of the Act. Thus, the addition made by the AO and as confirmed by the ld.CIT(A) for the assessment years 2014-2015, 2015-2016 & 2016-2017 stands deleted and appeals in ITA No.201, 202 & 203/CTK/2023 are allowed. 9. In appeals No.204 & 205/CTK/2023, filed by the assessee for A.Ys.2018-2019 & 2019-2020 respectively, the assessee has challenged the addition made towards suppression of sales as undisclosed income.

8 ITA Nos.201-205/CTK/2023 10. Brief facts of the case are that the ld. AO observed that the assessee has made certain sales to its sister concern where the rate charged is not in accordance with the price declared by Indian Bureau of Mines (in short “IBM’). Thus, by making reference to Rule 45 of Mineral Conservation and Development Rules, 2017, he concluded that the price changed from related parties is lesser than the IBM price and made the addition towards the differential rate as undisclosed income of assessee. 11. During the course of hearing, ld. AR has filed a detailed written submissions on the merits of the issue, which is reproduced as under :- The appellant is a company, derives income from mining and trading of Iron Ore from its mine, located at Deojhar. The search and seizure operation conducted in the business premises of the appellant at Rourkela. During the year there are additions under the head Suppression of Sale, Quality Complain, and another addition Suppression of sale from information gathered from Form - H-1. In the appeal the Learned Commissioner of Income Tax (Appeals), only sustained the addition of Suppression of Sale amounting to Rs.17,86,243.00. As per the Assessing Officer, in course of search operation, it was found that the appellant is frequently engaged in selling Iron Ore to related partied, namely Mangalam Metals and Ores Limited and Shyam Sel and Power Limited and others at a rate much less than the rate declared by the Indian Bureau of Mines (IBM). The appellant Submitted before the assessing Officer that IBM rate was not declared as on date of booking from parties. Hence, the assessee was not aware of the IBM rate on the date on which the orders are placed with the parties. Therefore, it is not realistic to compare the rates on a particular date. The submission of the assessee rejected by the learned Assessing Officer, without adducing any reasons. The learned Assessing Officer heavily relied upon sub - rule (8) of Rule 45 of Mineral Conservation and Development Rule (MCDR) 1988. In para 5.4 of his order, the learned Assessing Officer mentioned that the appellant has made sale to following related parties at the rate much lower than the arm's length price i.e. rate determined and declared by IBM. Therefore, as per sub clause (c) and proviso in the sub-rule (8) of Rule 45 of MCD Rule 1988, the suppression of sale is computed.

9 ITA Nos.201-205/CTK/2023

Name of the Ex-Mines Sales Sales value as per Difference Parties Value (in Rs.) IBM rate As on as per PO PO date (in Rs.) date (in Rs.) [1} [2] [3] [3-2]=[4] Kashvi Power 11908284 13694526 1786243 and Steel Pvt. Ltd. Total 11908284 13694526 1786243 It is submitted that the assesse is regularly maintaining its Books of Account as provided in section 145(1), in mercantile system. It also complied with Accounting Standard, as and when notified. The learned Assessing Officer verified the Books of Account. He has not detected a single mistake in the Books of Accounts. He has not rejected the account and applied section 145(3) of the Income Tax Act. For this proposition the assessee relies on the decision of Honourable Madras High Court in the case of PCIT vs. Marg Ltd., delivered on 20.07.2017., reported in 396 ITR 580. The relevant portion of the judgement reads as under. "In para 45 (3) of the above order, it is mentioned that where the AO is not satisfied about the correctness or completion of the account of the assessee, or where method of account provided in sub section (1) has not been regularly followed by the assessee or income has not been computed in accordance with the standards notified under subsection (2), the AO may make an assessment in the manner provided in section 144. Therefore, it is sine qua non that the AO come to a conclusion that Books of Accounts maintained by the assessee are incorrect or incomplete or unreliable and rejects the books of Accounts before proceeding to make his own assessment. In instant case, there is no reference in the Assessment order of the AO regarding rejection of the Books of Account. In the concluding paragraph of the order, it is mentioned that "owning to all that have been stated, there is no merit whatsoever, in the appeal filed by the Revenue as addition of income on estimate basis, has conceded by the revenue before the IT AT, being done without scrutiny and without rejecting Books of Account". In view of above submission, the learned Assessing Officer without recording any defect in the Books of Account took shelter under sub-rule (8) of rule 45 of MCD Rule 1988, to compute suppression of sale, which is against the computation of income as per the provision contained in Income Tax Act. The appellant strongly protest the act of the learned Assessing Officer which is against law. In any case the appellant is proceeding to clarify the addition made by the learned Assessing Officer, relying upon the said rule, which is completely incorrect and the said rule is not properly understood by the Assessing Officer.

10 ITA Nos.201-205/CTK/2023 Sub-rule (8) of rule 45 of the Mineral Conservation and Development Rules, 1988, is mentioned as under: " In case of mining of minerals by the owner, agent, mining engineer or manager of mine, the ex-Mine price of mineral shall be,- (a) where export has occurred, free-on-board (F.O.B) price of the mineral, less deductions specified (b) where domestic sale of mineral has occurred, sale price of mineral recorded in the invoice less the actual expenditure incurred towards loading, unloading, transportation and other charges beyond mine site: Provided that in case a sale has occurred- (i) between any persons or associations of persons or companies and where the seller has a substantial interest in the association of persons or company buying the mineral or where the buyer has a substantial interest in the association of persons or company selling the mineral; (ii) for the purposes of use of mineral in a end/use industry for which the mine is a captive supplier, then such sale shall not be recognized as a sale for the purpose of this rule and in such case, clause (c) of this sub- rule shall be applicable. Explanation- For the purpose of this sub-rule, the expression "substantial interest in the association of persons or company buying or selling the mineral, as the case may be", shall mean,- (i) a person who is member of the management board of the association or company or is entitled or eligible to a share in the profits of the association or company buying or selling the minerals, as the case may be, to an extent exceeding ten percent of the distributed profit; (ii) an association of persons or company, when such association of persons or company is entitled or eligible to a share in the profits of the association or company buying or selling the minerals, as the case may be, to an extent exceeding ten percent of the The sub- clause (c) speaks where the sale has not occurred, the average sale price published monthly by the IBM for a particular mineral for particular state shall be taken at the ex-mines price. Sub-clause (b) (ii) of MCD Rule speaks for purpose of use of minerals ,in a end use industry for which mine is a captive supplier then such sale shall not be recognized as sale for the purpose of this rule and in such case, clause (c) of the sub-rule shall be applicable. The learned Assessing Officer has applied sub-clause (c) and proviso in sub-rule (8) of rule 45 of MCD Rule 1988, the sale value in respect of sale made by the appellant could be sale value as per

11 ITA Nos.201-205/CTK/2023 IBM rate. Hence, the difference of sale value as per IBM rate and actual rate determined as suppression of sale. The learned assessing Officer has completely misunderstood the provision contained in sub-rule (8) of rule 45 of MCD Rule 1988. Sub-rule (c) of the said rule speaks, where the sale has not occurred, average sale price published monthly by the IBM shall be taken as ex-mines price. In the case of the appellant, sale has occurred for which clause (c) shall not be applicable. Moreover, as per the proviso (ii) of clause (b) of the said rule for the purpose of use of minerals in a end use industry for which mine is a captive supplier, then such sale shall be recognized as per clause (c) of sub-rule (8) of rule 45 of MCD Rule 1988. The mines of the appellant is not a captive supplier for which clause (c) of sub-rule shall not be applicable. Further as per proviso (i) of the said Rule, where sale occurred, between any person or association of person or companies, where seller has a' substantial interest in association of person or companies etc., the clause (c) of the said rule shall be applicable. The explanation to clause (i) (b) of the said rule defines the expression of "substantial interest". The appellant is not fulfilling that it has any substantial interest anywhere mentioned in the said proviso. In these circumstances, the appellant is neither related to any buyer nor its mine is a captive unit for any industry. The Learned Commissioner of Income Tax (Appeals) in his order has in detail discussed and concluded that none of the buyers is related to the appellant. Without understanding the clauses, contained in sub-rule (8) of rule 45 of MCD Rule he applied the same for the purpose of calculating suppression of sale. In fact the clause (b) of the said Rule shall be applicable to the appellant which speaks, where domestic sale of minerals has occurred, sale price of minerals recorded in the invoice in case of mining of minerals by the owner, agent, mining Engineer of mine, ex-mines price for the minerals shall be as per clause (b) to the said rule -------- where domestic sale of minerals has occurred, sale price of the minerals recorded in the invoice less the actual expenditure incurred towards loading, unloading transportation and other charges beyond the mine site. As discussed above, proviso to rule (b) shall not be applicable to the appellant being it has no sale to any captive unit or related party. Hence IBM price shall not be applicable to the appellant for which it is required to find suppression of sale, which is the difference between IBM price and actual sale. Order of the Commissioner of Income Tax (Appeals)

12 ITA Nos.201-205/CTK/2023 The Learned Commissioner of Income Tax (Appeals), deleted two small additions in para 5 and 6 of his order. The only addition sustained related to suppression of sale, amounting to Rs.17,86,243.00. In page no. 12 to 15 of the Paper Book, the Learned Commissioner of Income Tax (Appeals), produced the submission of the appellant. Page no. 16 - 20 of Paper Book contains the order of the Learned Commissioner of Income Tax (Appeals) In para - e, page no. - 18 of Paper Book the' Learned Commissioner of income Tax (Appeals) concluded that the Assessing Officer has alleged that the assessee has substantial interest in this party. Copy of the Balance Sheet of the assessee showing the name of the shareholders having more than 5% shares and the investment pattern reflect that the appellant has no substantial interest of this company (Annexure - A & B) In para - f, page no. -19 of the Paper Book the Learned Commissioner of income Tax (Appeals) concluded that on the basis of the above documents, it is seen that the assessee is not related to Kashvi Power and Steel Pvt. Ltd. as defined in the Sub-rule (8) of 45 pf Mineral Conservation and Development Rule, 1988. In para - 4.7, of CIT(A) Order contained in Page No. -19 of Paper Book speaks about the validity of price fixed by IBM, which is not applicable to the appellant and also para - 4.6 contained in Page No. -17 of Paper Book, the Learned Commissioner of income Tax (Appeals) in para-a & b speaks about the role of IBM. Hence, the IBM price is not sacrosanct for comparison with the ex-mines price to find out suppression of sale. To conclude the observation of the Learned Commissioner of income Tax (Appeals), mentioned in para 4.6 of his order, the appellant has no substantial interest in the buyer's company, namely, Kashvi Power & Steel Limited. and also, IBM price is not sacrosanct for comparison to find out suppression of sale. In page no. -19 of Paper Book, the Learned Commissioner of income Tax (Appeals) mentioned as under: As per Assessing Officer, the assessee sold materials to related party at a price lower than the price fixed by the IBM. As per observation in para - 4.6 and 4.7 of the Learned Commissioner of income Tax (Appeals) Order, being having no substantial interest in the buyer's company and also no sale is made to the captive unit, as per proviso (b) of sub-rule (8) of rule 45 of MCD Rule 1988. Hence, clause (b) of the said rule is applicable which speaks that: (b) where domestic sale of mineral has occurred, sale price of mineral recorded in the invoice less the actual expenditure incurred

13 ITA Nos.201-205/CTK/2023 towards loading, unloading, transportation and other charges beyond mine site The appellant has recorded the sale as per invoice, which is reflected in the Profit and Loss account and expenditure incurred towards loading, unloading, transportation and other charges recorded and debited to Profit and Loss account. The Learned Commissioner of income Tax (Appeals), instead of concluding asked the appellant to compare selling price recorded with other parties, which is comparison of intra-sale between two parties by the appellant. The comparison of sale price among the parties to whom sale made shall not be given any meaningful result. The Learned Commissioner of income Tax (Appeals), mentioned that the Authorised Representative would submit only skeleton details "'which is placed in the Paper Book, in page no. - 30. The Learned Commissioner of income Tax (Appeals),mentioned in para - 4.9 of his order contained in page no.20 of Paper Book that only inter party comparison can throw light on dubious transaction of the assessee, if any. Lastly, he concluded that in para - 4.10, Page No- 10 of the Paper Book that the allegation of the learned Assessing Officer that the appellant has earned undisclosed income though suppressed sale, cannot be brushed aside. It is also mentioned that Learned Commissioner of income Tax (Appeals) constrained to concur with the AO on this issue. When the learned Assessing Officer treated the buyer Kashvi as related party, which is not correct as per the order of the Learned Commissioner of income Tax (Appeals), and he compared with IBM price which is not sacrosanct as per him, the appellant failed to understand how the Learned Commissioner of income Tax (Appeals) is constrained to concur with the AO on this issue. 12. Per Contra, ld. CIT D/R heavily relied upon the orders of the lower authorities and submitted that assessee has sold the goods to the related parties at the rates lower than the rates prescribed by IBM. During the course of assessment as well as in the appellate proceedings despite of specific opportunity provided through assessee submitted comparative chart but failed to substantiate the same with documentary evidences. On the other hand, ld. AO has based his findings on the basis of relevant rates by IBM and also after making reference to MCD Rules, applicable to the assessee. Therefore, he prayed for the confirmation of the orders of

14 ITA Nos.201-205/CTK/2023 lower authorities wherein it has been held that assessee has earned undisclosed income by selling the material to the related parties at lower rates. 13. We have heard the rival submissions. Admittedly no material whatsoever was found as a result of search indicating any undisclosed / underpriced sales made to the related parties. The ld. AO solely relying upon the rates prescribed under IBM, held that the turnover declared by the assessee is understated to the extent the material sold to the related parties. From the perusal of the assessment order we find that the AO has not only accepted the trading results after verification of the books of accounts but also has not invoked the provisions of section 145(3) of the Act, before making additions for suppression of sales. As per section 145 of the Act, the AO is empowered to reject the books of accounts of the assessee and make best judgment assessment in the manner as specified under section 144 of the Act if he is not inter-alia satisfied with the completeness or correctness of the books of accounts of the assessee. Generally, the instances for the rejection of books of account include when entries in respect of certain transactions are altogether omitted or incorrect or where the accounts show an abnormally low rate of profit or where there is an inherent lacuna in the system of accounting. In the instant case, the AO alleged that the assessee has charged comparatively lower price from the sister concerns and when the assessee field the comparative chart of the sale price charged from the related and unrelated parties, the same was rejected for the want of

15 ITA Nos.201-205/CTK/2023 documents by grossly ignoring the fact that the same is verifiable made from the same set of accounts which were produced for examination before the AO and duly verified by him. A copy of the said chart is also filed before us which is available in the paper book at page 30 of AY 20019-20. As per the said chart it is clearly established that the assessee has sold the material to the related parties either at the same rates or higher rate as were charged from non-related parties and no defect was pointed out by lower authorities in the said chart. Therefore, the allegation of the lower authorities that the material was sold to related parties at the lower price does not hold water nor there was any defect in the books of account maintained by the assessee. Further in any case, the A.O. has not rejected the books of accounts before making trading additions on account of suppressed sale in the hands of the assessee company. In fact, the A.O. has added the alleged suppressed sales amount as estimated by him to the total income returned by the assessee, which itself shows total lack of application of mind by the A.O. The hon’ble Karnataka high court in the case CIT vs. M/s. Anil Kumar Co., (2016) 386 ITR 702 (Karnataka) has held as under : "11. Insofar as the estimation of gross profit made by the Assessing Officer modified by the CIT(Appeals), tribunal has rightly held that when the books of accounts of the assessee had not been rejected and assessment having not been framed under section 144 of the Income Tax Act the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable. Section 145(3) of the Act lays down that the Assessing Officer can proceed to make assessment to the best of his judgment under section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessing Officer has not rejected the books of accounts of the assessee. To put it differently the Assessing Officer has not made out a case that conditions laid

16 ITA Nos.201-205/CTK/2023 down in Section 145(3) of the Act are satisfied for rejection of the books of accounts. Thus, when the books of accounts are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the Assessing Officer nor CIT(Appeals) have rejected the books of accounts maintained by the assessee in the course of the business. As such tribunal has rightly rejected or set aside the partial addition made by Assessing Officer for arriving at gross profit and sustained by the CIT(Appeals) and rightly held that entire addition made by the Assessing Officer was liable to be deleted." 14. Similar view has been expressed by the Hon’ble Madras High court in the case of PCIT Vs. Marg Ltd (supra). In view of the above discussion and by respectfully following the judicial pronouncements, we are of the considered view that the addition made by AO on account of suppression of sales is without any basis more particularly when he himself has accepted the books of accounts of the assessee from which the income declared by the assessee company is deduced. Accordingly, the addition made by the AO and as confirmed by ld. CIT(A) on account of suppression of sales at Rs. 21,11,089/- and Rs.5,39,92,037/- for AY 20018-19 and 2019-20 respectively, are deleted. All the grounds taken by the assessee in both the assessment years are allowed. 15. In the result, all the appeals of the assessee are allowed. Order dictated and pronounced in the open court on 27/05/2024. Sd/- Sd/- (GEORGE MATHAN) (MANISH AGARWAL) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य/ ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 27/05/2024 Prakash Kumar Mishra, Sr.P.S.

17 ITA Nos.201-205/CTK/2023 आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. M/s Tarini Minerals Pvt. Ltd. A-6, Commercial Estate, Civil Township, Rourkela-769004 प्रत्यथी / The Respondent- 2. DCIT, Central Circle, Sambalpur आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, 5. ITAT, Cuttack 6. गार्ड पाईऱ / Guard file. सत्यावऩत प्रतत //True Copy// आदेशानुसार/ BY ORDER, (Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack