SRI D M SANKAR vs. THE INCOME TAX OFFICER

The appeal was admitted by this Court to consider the following substantial questions of law.

The assessee is an individual, who is carrying on the business of trading in Iron Ore on wholesale basis in the name and style of his proprietary concern. “M/s. Vinayaka Minerals”. The return of income for the year under consideration was originally filed by the assessee and subsequently it was revised. Since the extraction expenses claimed by the assessee during the year in question was substantially higher than that of the immediately preceding year, the Assessing Officer disallowed the said extraction expenses to certain extent on examining the material on

Being aggrieved by the disallowance of extraction/re-screening expenses claimed by the assessee to certain extent and allowing only to the extent of Rs.64,30,000/- calculated at Rs.200/- per M.T., the assessee preferred appeal before the Commissioner of Income Tax [Appeals]. Learned Commissioner of Income Tax [Appeals] restricted the addition to Rs.23,00,000/- as against Rs.45,00,000/- made by the Assessing Officer, thereby granted relief of Rs.22,00,000/- to the assessee.

Being aggrieved by the said order of the Commissioner of Income Tax [Appeals], the Revenue as well as the assessee both preferred appeals before the Tribunal. The Tribunal passed a common order impugned herein dismissing the appeal filed by the

Being aggrieved by the same, the assessee has preferred this appeal raising the substantial questions of law as aforesaid.

Learned counsel Smt.Jinita Chatterjee appearing for the assessee strongly contended that the Tribunal has failed to appreciate the total cost of purchases which includes basic cost and cost of re- screening charges which cannot be considered in isolation since they are intrinsically related. The Assessing Officer has considered Rs.200/- as cost of re-screening charges whereas the assessee had incurred Rs.325/- per M.T, since poor quality of iron ore was purchased by the assessee during the Assessment year in question. It is obvious that to bring the poor quality of iron ore to the standard quality, more extraction/re-screening expenses requires to be

Learned counsel for the Revenue justifying the impugned order would submit that the Tribunal has extensively analyzed and granted the relief to an extent of Rs.22,00,000/- without any basis. In the absence of material evidence placed on record to establish the actual expenses claimed as the incurred expenses, the Assessing Officer having applied his mind even to the aspect of the low quality of material said to have been purchased vis-à-vis the extraction expenses which requires to be incurred, has rightly determined such expenses at Rs.200/- per M.T., notwithstanding such expenses claimed at Rs.38/- in the assessment year 2008-09 and Rs.35/- in the assessment year 2010-11. The same is based on the material evidence. The Commissioner of Income Tax [Appeals] ought not have further granted the relief on imaginary basis. The Tribunal having examined these aspects, more particularly, the invoices furnished by the assessee, has given a finding that there is low quality materials as well

We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.

Adverting to the arguments advanced by the learned counsel for the parties, we are of the considered opinion that there is some force in the arguments advanced by the learned counsel for the Revenue. No doubt, learned counsel for the appellant- assessee vehemently argued that the authorities have failed to consider the invoices in a proper perspective, we are unable to subscribe to her submissions. It is well settled that the Tribunal being the last fact finding

At this juncture, it would be profitable to quote the finding of the Tribunal on this aspect, which reads thus: “Even before us, the ld. Counsel for the assessee has made an attempt to support the case of the assessee by pointing out from some of the copies of invoices placed on record that lower grade material was purchased by the assessee during the year under consideration. A

It is relevant to note here that most of the adverse findings recorded by the AO while disallowing the claim of the assessee on account of extraction/ rescreening charges to the extent of about Rs.45 lakhs were found to be correct by the ld. CIT[A], but she still restricted the disallowance made by the AO on this issue to Rs.23 lakhs, giving a relief of about Rs.22 lakhs to the assesse on this issue, without giving any cogent or convincing reasons and without appreciating the fact that the claim of the assessee for higher extraction/ rescreening charges was allowed by the AO by adopting the rate of Rs.200 per m.t., as compared to the rate of Rs.38 per m.t., claimed by the assessee in the immediately preceding year.

As such, considering all the facts and circumstances of the case, we are of the view that the disallowance of Rs.45,05,867 made by the AO on account of extraction/ rescreening charges was fair and reasonable and the ld. ICT[Appeals] was not justified in restricting the same to Rs.23 lakhs. We, therefore, modify the impugned order of the ld.

Thus, it is clear that the attempt made by the assessee to establish the lower grade of material purchased by the assessee required more extraction/re- screening charges was not supported by any material evidence. The same being considered extensively by the Tribunal, we do not find any ground to interfere with the factual findings recorded by the Tribunal. Hence, we dismiss the appeal answering the substantial questions of law, in favour of the revenue and against the assessee.