SHANTILAL KHUSHALDAS AMD BROTHERS PVT. LTD,PANAJI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, MARGAO

Aggrieved by the order, the assessee has filed an appeal with the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, statements of facts and findings of the A.O and has sustained the disallowance of (i)barge and transshipped charges (ii) stock of stores and spares (iii) mining related expenses (iv)compensation paid to villagers and (v) denied the benefit of setoff brought forward losses and partly allowed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed the appeal before the Hon'ble Tribunal. 5. At the time of hearing, the Ld. AR submitted that CIT(A) has erred in not considering the information and overlooking the facts, details and submissions filed in the proceedings. Further CIT(A) has not issued notice calling for the additional details in support of the claims to comply with the information and the assessee has good case on merits and prayed for opportunity before the lower authorities. Per contra, the Ld.DR supported the order of CIT(A). 6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issues envisaged by the Ld.AR that the CIT(A) has erred in partially sustaining the additions/disallowances made by the Assessing Officer and overlooking the facts and material evidences filed. Prima-facie, the CIT(A) has dealt on the findings of the AO and has not considered the submissions/evidences of the assessee filed in the proceedings. The Ld.AR emphasized that the assessee has filed submissions before the CIT(A) vide letter dated 9.01.2018 placed at page 133 to 236 of the paper book, Subsequently, incompliance to the notice dated 17.02.2020 issued by the CIT(A), in respect of remand report received from the Assessing Officer were the opportunity was provided to file rejoinder. The assessee has filed detailed rejoinder submissions on the remand report on 13.03.2020 on the E portal placed at page 237 to 245 of the paper book. Subsequently without issuing further notice or calling for additional information, the CIT(A) has decided the assessee appeal. Therefore, we considering the facts, circumstances, submissions and principles of natural justice shall provide with one more opportunity of hearing and accordingly restore the disputed issues to the extent sustained by the CIT(A) to the file of the CIT(A) for afresh adjudication and the CIT(A) shall provide adequate opportunity of being heard to the assessee and the assessee should also cooperate in submitting the information for early disposal of the appeal and the grounds of appeal of the assessee are allowed for statistical purpose. 7. In the result, the appeal filed by the assessee is allowed for statistical purposes. ITA No. 137/PAN/2025(A.Y.2011-12) 8. The Assessee has filed the appeal against the order of the CIT(A), Panaji passed u/sec 250 of the Income Tax Act. The assessee has raised the following grounds of appeal as under:- a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the mine related expenses of Rs. 12,96,106/- were capital in nature. b) Without prejudice to the appellant’s principal claim that the said expenditure was revenue in nature, the ld. CIT(A) in the alternative, ought to have directed the Ld.AO to grant depreciation on such expenditure. c) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in sustaining the addition of ₹. 1,04,28,405/- u/sec 41(1) of the Act.

The brief facts of the case are that, the assessee has filed the return of income for the A.Y. 2011-12 on 30.09.2011disclosing a total income Rs. NIL. Subsequently, the case was selected for scrutiny and notice u/sec 143(2) and u/sec 142(1) of the Act are issued. In compliance, the Ld.AR of the assessee appeared from time to time and filed the details and explanations. The Ld.AO considered the information and submissions and dealt on the provisions of section 14A of the Act and Rule 8D of the income tax rules and computed disallowance of Rs.8,116/- .Further the Assessing Officer found that the Sundry creditors credit balances were remained unpaid and required the assessee to explain with the reasons for pending outstanding balances and the assessee could not clarify, hence amount of Rs. 1,04,28,405/- is disallowed as cessation of liability u/sec 41(1) of the Act. On the last disputed issue, the A.O. found that the assessee has debited mines development expenses which are in the nature of capital expenditure and disallowed Rs.12,96,106/- .Finally the A.O. assessed the total loss of Rs. 33,75, 667/- and passed the order u/sec 143(3) of the Act dated 14.03.2014.

Aggrieved by the order of the Assessing Officer, the assessee has filed the appeal with the CIT(A).Whereas the CIT(A) has considered the grounds of appeal, statement of facts, submissions and findings of the Assessing Officer but sustained action of the assessing officer and dismissed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed the appeal with the Hon'ble Tribunal. 11. At the time of hearing, the Ld.AR submitted that CIT(A) has erred in sustaining the addition of mines related expenses as treating as capital expenditure. The Ld.AR contentions are that these are the expenses incurred every year by the assessee and are revenue expenses in nature and hence debited to the Profit & Loss account. 6 On the disputed issue of cessation of liability u/sec 41(1 of the Act , the Ld.AR submitted that the assessee has written back substantial part of creditors and offered to tax in subsequent years. and the assessee has good case on merits and prayed for an opportunity to explain before the lower authorities. Per contra, the Ld.DR supported the order of CIT(A). 12. We heard the rival submissions and perused the material on record. The sole crux of the disputed issues envisaged by the Ld.AR that the CIT(A) has erred in sustaining the additions/disallowances made by the Assessing Officer and overlooking the facts and material evidences filed. Prima- facie, the CIT(A) has dealt on the findings of the AO and has not considered the submissions/evidences of the assesse filed in the proceedings. The Ld.AR emphasized that these mine development expenses are requisite business expenses and are the revenue expenses and explained the details of expenditure. We find the submissions are realistic and we set aside the order of the CIT(A) on this disputed issues and direct the AO to delete the disallowance. 13. On the second disputed issue of of cessation of liability u/sec 41(1 of the Act , the Ld.AR submitted that the assessee has written back substantial part of creditors and offered to tax in subsequent years and referred to the submissions filed placed at page 151 to 168 of the paper book. The Ld.AR prayed that an opportunity be provided before lower authorities to explain with the evidences in respect of written back of creditors amount payable. Therefore, we considering the facts, circumstances, submissions and principles of natural justice shall provide with one more opportunity of hearing and accordingly restore this disputed issue to the extent sustained by the CIT(A) to the file of the Assessing officer to verify and examine the facts and adjudicate a fresh on merits. The assessee should be provided adequate opportunity of being heard to the assessee and the assessee should also cooperate in submitting the information and the grounds of appeal of the assessee on this disputed issue is allowed for statistical purpose. 14. In the result, the two appeals filed by the assessee (i) ITA.NO.136/PAN/2025 is allowed for statistical purpose and ITA.NO.137/PAN/2025 is partly allowed for statistical purpose.