DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, SAMBALPUR vs. SMT. INDRANI PATNAIK, ROURKELA

ITA 182/CTK/2020Status: DisposedITAT Cuttack11 December 2025AY 2010-1136 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A) and dismissed the Revenue's appeals. Regarding the reopening of assessment (Issue 1), the Tribunal found that the AO had blindly followed the Justice M.B. Shah Commission report without independent verification and without considering the Supreme Court's observations in the Goa Foundation case, which had discredited the report for violating principles of natural justice. The CIT(A)'s finding that the reopening was a nullity and bad in law was upheld. Consequently, the addition made on account of suppressed production was also set aside. Regarding the disallowance of expenses under Section 37 (Issue 2), the Tribunal agreed with the CIT(A) that the disallowance was arbitrary and unjustified. The CIT(A) had correctly observed that the assessee had not been penalized by any statutory authority for any violation of mining or environmental laws, and the payments made were for genuine business expenditure. The Tribunal noted that the issue was squarely covered by the decisions of a coordinate bench in the assessee's own case and in the case of ACIT Vs. Sri Dipti Ranjan Patnaik. Since the quantum appeals were dismissed, the penalty appeals were rendered infructuous and also dismissed. The operative direction was the deletion of the disallowance and the dismissal of the Revenue's appeals.

What were the facts?

The Revenue filed appeals against the orders of the CIT(A) for Assessment Years (AY) 2009-10 and 2010-11, challenging penalties levied by the ACIT under Section 271(1)(c) of the Income Tax Act, 1961. The appeals were filed with a delay of 4 days, which was condoned. The core issue for AY 2009-10 involved the reopening of assessment under Section 147/148. The Assessing Officer (AO) initiated reassessment based on the Justice M.B. Shah Commission report, alleging suppressed production of Iron Ore and claiming an addition of ₹93,25,00,000 and disallowance of expenses of ₹129,42,25,780 under Section 37. The CIT(A) quashed the reopening, deeming it a nullity. The appeals for AY 2010-11 and the penalty appeals were consequential.

What were the issues?

1. Whether the reopening of assessment under Section 147 read with Section 148 of the Income Tax Act, 1961, for AY 2009-10, initiated based on the Justice M.B. Shah Commission report, was valid, considering the Supreme Court's observations in Goa Foundation v. Union of India & others regarding the commission's findings and the AO's independent application of mind. 2. Whether the disallowance of expenses amounting to ₹129,42,25,780 under Section 37(1) of the Income Tax Act, 1961, for AY 2009-10, treating them as illegal expenses, was justified, particularly when the assessee had not been penalized by any statutory authority for any violation of mining or environmental laws. Assessee's contentions (implied from CIT(A)'s order and Tribunal's reasoning): The reopening was bad in law as the AO blindly relied on the Justice M.B. Shah Commission report without independent verification and without considering the Supreme Court's judgment in Goa Foundation which discredited the report for violating principles of natural justice. The disallowance under Section 37 was unjustified as the assessee had not been penalized by any statutory authority, and the payments were for genuine business expenditure. The assessee relied on the decision in their own case and in ACIT Vs. Sri Dipti Ranjan Patnaik. Revenue's contentions (implied from grounds of appeal and AO's actions): The AO had valid reasons to believe income had escaped assessment based on the Justice M.B. Shah Commission report, indicating suppressed production and illegal mining. The expenses disallowed were illegal and not deductible under Section 37.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147,Section 148,Section 143(2),Section 37,Section 37(1),Section 23C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “DB” BENCH, CUTTACK

Before: SHRI DUVVURU RL REDDY, VP & SHRI RAJESH KUMAR, AM

For Appellant: Shri S.C. Bhadra, AR
For Respondent: Shri Ashim Kumar Chakraborty, DR
Hearing: 18.09.2025Pronounced: 11.12.2025

Per Rajesh Kumar, AM:

These are appeals preferred by the Revenue against the orders of the Commissioner of Income-tax (Appeals) [the learned CIT (A)](hereinafter referred to as the “Id. CIT (A)”] dated 20.03.2020, for the AY 2009-10 & 2010-11. The penalties were levied by the ACIT, Rourkela Circle u/s 271(1)(c) of the Act vide even dated 30.09.2016 for A.Ys. 2009-10 & 2010-11. 2. At the outset, we observe from the appeal folder that there is a delay of 4 days in filing the appeal by the department and in support of this a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the adminis

The order continues below.

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