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Income Tax Appellate Tribunal, ‘A’ BENCH, KOLKATA
Before: Shri Sanjay Garg & Shri Girish Agrawal
Per Sanjay Garg, Judicial Member:- The present appeal has been preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 31st March, 1
ITA No. 879/KOL/2023 Assessment Year: 2012-2013 Eastern Coalfields Limited
2023. The Revenue in this appeal has taken the following grounds:- “1. whether on the facts and circumstances of the case and in law, the ld. CIT(A), NFAC is justified in deleting the addition made by the AO of Rs.248.19 Crs. being expenses for ‘Overburden Removal Adjustment’ despite the fact that the assessee-company had not produced documentary evidences to corroborate its claim during the course of assessment proceedings. 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A), NFAC is justified in deleting the addition inspite of the fact that the assessee company had not submitted party-wise list, total payment made thereto and TDS has to be deducted u/s 40(a)(ia) on payment made to different parties during the relevant period”.
Brief facts of the case are that during the assessment proceedings, the ld. Assessing Officer has noted that the assessee has claimed an amount of Rs.248.19 crores as ‘Overburden Removal Adjustment’ expenditure. It was explained by the assessee that the expenditure was charged on technically evaluated average ratio (COAL: OB) at each mine with due adjustment for advance stripping and ratio variance after the mines are brought to revenue. However, ld. Assessing Officer observed that the expenditure was being claimed by the assessee by applying certain mathematical ratio. However, it was not clear as to whether the said expenditure was actually crystallized at the point of claiming such expenditure and even it was not clear whether the assessee has actually incurred such expenditure. The ld. Assessing Officer after considering the submissions of the 2
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assessee disallowed the said expenditure for the following reasons:-
Going by the above discussion, before deciding the allowability or otherwise of such claim of the assessee, it is imperative upon the undersigned to consider the relevant facts gathered by way of enquiry & examination conducted during the assessment proceeding. At the cost of repetition, the facts evolving out of the proceedings are summed up as below:- That this claim of “Overburden Removal Adjustment” is not supported by any substantial physical evidence whatsoever; and That this expenditure has really taken place could not be established by the assessee despite being provided with due opportunities; and That this claim is primarily and essentially a technical claim based on certain numerical; and That the assessee failed to establish with necessary supporting documents that this expenditure has crystallized; and The party wise list of payment with PAN, Name of the Party, total Payments, TDS amount and the projects related in respect of the has not been submitted by the assessee. Also, the details and supporting documents in the form of bills and vouchers with complete ledger accounts of the party were not submitted. This being so, the amount of payments on different dates during the period concerned cannot be correlated with the applicability of provision of section of 40(a)(ia) in so far as TDS is concerned. In other word, whether TDS has been made in respect of all the payments made to the different parties is not ascertainable and verifiable. The possibility of violation of provisions of TDS cannot be ruled out. As per section 40(a)(ia) of LT. Act, 1961 the expenses debited cannot be allowed with respect to payments made to contractors etc. unless TDS have been made on such payments. The assessee’s maintenance of accounts and debiting of OBR on the basis of ratio of excavation of coal cannot be the sole basis of allowing such expenditure. This has to be subjected to be compliance of other provisions of law and the section 40(a)(ia) is the most important provision to be complied with. Since the assessee has not submitted complete details of payments, the interest of Revenue needs to be protected by disallowing the aforesaid expenditure u/s 40(a)(ia) of I.T.
ITA No. 879/KOL/2023 Assessment Year: 2012-2013 Eastern Coalfields Limited
Act. The onus was put on the assessee to support its claim of expenditure with sufficient evidence the form of vouchers, bill, ledger accounts etc. The assessee has failed to discharge its onus. It is therefore concluded that the aforesaid expenditure is not allowable within the four corners of law, on facts and after complying with the principle of natural justice”.
However, the ld. CIT(Appeals) deleted the addition as made by the ld. Assessing Officer observing as under:- “6.2.3. The appellant has confirmed and certified that the amount of ’Overburden Removal Adjustment’ cost of Rs. 248.19 Crs has. been computed correctly in accordance with the report of J N Bose, which has been consistently followed by the appellant. It has also been confirmed that independent auditors as well as statutory C&AG auditors have also not found fault with the computation of Rs. 248,19 Crs. From the perusal of operational details, It is noticed that there has been an Overburden Removal of 66.31 Millan cubic metric tons (MCuMTs) during the year. Thus, on a combined reading of the response of the appellant and the appraisal of the quantitative details of overburden removal, the apprehension of Ld. AO regarding physical manifestation of "Overburden Removal Activities'' is also laid to rest Accordingly in consideration of factual matrix of the case, I find no reason to impose a different methodology on the appellant for computing ’Overburden Removal Adjustment other than the methodology prescribed in the report of J N Bose, which is also acceptable to C&AG Statutory auditor, and which is being followed consistently from last many years. The Income tax department has also accepted the amount of debit on account of ‘overburden removal adjustment’ in past several years, and in this year, Ld. AO has not brought any material facts to dispute such methodology. it is directed that ‘principles of consistency’ may be adhered by the ld. AO, unless any evidence or finding are available to dispute accepted methodology. Accordingly, the ground of appeal of the appellant is allowed and disallowance of Rs.248.19 Crs. Stands deleted”.
Being aggrieved, Revenue has come in appeal before us. The main contention of the ld. D.R. is that the ld. CIT(Appeals) has deleted the disallowance of overburden expenditure only on the basis of J.N. Bose Report applying some calculation method. However, the assessee has not proved that such expenditure was 4
ITA No. 879/KOL/2023 Assessment Year: 2012-2013 Eastern Coalfields Limited
actually incurred by the assessee nor the assessee submitted party-wise list to whom the payment was made and whether TDS has been deducted as per provisions of section 40(a)(ia) of the Income Tax Act.
The ld. A.R. of the assessee in this respect has submitted that in open cast projects, generally the proportion of overburden removal to coal raised is much more in initial years and gradually comes down in later periods except when some unforeseeable occasion when major geological changes are encountered when the proportion may change materially. In order to change the cost of overburden uniformly throughout the life of the project, OBR accounting was introduced to ensure that the total cost of particular period in terms of coal is not unduly affected due to dissimilar stripping ratio of Coal and OB prevailing in different period. Periodic review of Average ratio is done as the forecast made in PR may change with time and progress of mines in which case adjustment has to be made. He has further submitted that assessee has paid all the expenses after the due compliance of TDS provisions wherever required on which basis the value of Rs.248.19 crore shown under Overburden Removal Adjustment. It is also stated that assessee is subjected to Statutory Audit and CAG Audit and there were no negative comment regarding any compliance. He has submitted that the matter may be restored to the file of ld. Assessing Officer for verification of the aforesaid facts.
The ld. D.R. has not objected to the same. 5
ITA No. 879/KOL/2023 Assessment Year: 2012-2013 Eastern Coalfields Limited
In view of this, the impugned order of the ld. CIT(Appeals) is set aside and the matter is restored to the file of ld. Assessing Officer for verification of the facts whether the expenditure claimed by the assessee has been actually incurred and TDS provisions as per Section 40(a)(ia) have been applied. The ld. Assessing Officer will also look into the method of bifurcation/calculation of the overburden expenditure and decide the issue afresh in accordance with law.
In the result, the appeal of the Revenue is treated as allowed for statistical purposes. Order pronounced in the open Court on 13/03/2024. Sd/- Sd/- (Girish Agrawal) (Sanjay Garg) Accountant Member Judicial Member Kolkata, the 13th day of March, 2024
Copies to :(1) Deputy Commissioner of Income Tax, Asansol, Aayakar Bhawan, Vivekananda Saani, Kanyapur-713341, West Bengal (2) Eastern Coalfields Limited, Sanctoria, Asansol, Paschim Burdwan-713333, West Bengal
(3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi; (4) CIT- , Kolkata 6
ITA No. 879/KOL/2023 Assessment Year: 2012-2013 Eastern Coalfields Limited
(5) The Departmental Representative; (6) Guard File TRUE COPY By order
Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.