M/S. ORISSA MINING CORPORATION LIMITED,BHUBANESWAR vs. ACIT, CIRCLE-2(1), BHUBANESWAR

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.37/CTK/2019 (नििाारण वषा / Assessment Year :2013-2014) M/s Orissa Mining Corporation Ltd., OMC House, Post Box No.34, Bhubaneswar-01 PAN No.AAACO 3324 L …………….. Assessee Versus ACIT, Circle-2(1), Bhubaneswar ………………Revenue

Shri Siddharth Ranjan & Dinakar Mohanty, CAs for the assessee Shri M.K.Gautam, CIT-DR for the Revenue Date of Hearing : 21/06/2022 Date of Pronouncement : 21/06/2022 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A)-1, Bhubaneswar, dated 20.12.2018 passed in I.T.Appeal No.0740/17-18 for the assessment year 2013-2014. 2. It was submitted by the ld. AR on behalf of the assessee that he has filed additional ground in regard to the reopening of the assessment. It was submitted by the ld. AR that the reopening has been done on a change of opinion.

2 ITA No.37/CTK/2019 3. In reply, ld.CIT-DR vehemently opposed to the issue and filed his written submissions as follows :- In this case, the assessee company has challenged the reopening u/s147 on the ground that there was no tangible material available with the A.O. to reopen the case u/s.147 of the Act. The question whether any tangible material was available with the A.O. for reopening or not and how the same could be ascertained from the records itself for A.Y. 2013-14 and A.Y. 2016-17, is squarely covered by various judgements. In this regard, reliance is placed on the following decisions: a) In the case of A.L.A. Firm vs. CIT (189 ITR 285), the Hon'ble Supreme Court has explained the legal position as under:- "This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas [1986] 21 S.T.C. 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarized by the High Court in the following words represents, in our view, the correct position in law:- "The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income Tax Officer subsequent to the original assessment. If the Income Tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where however, the Income Tax Officer had not considered the material and subsequently come by the material from the record itself, then such a case would fall within the scope of Section 147(b) of the Act." b) To the same effect is the judgment of the Hon'ble Delhi High Court in the case of Consolidated Photo & Finvest Ltd. vs. ACIT (281 ITR 394) wherein it was held that it makes no difference as to whether the material is unearthed from the existing record or otherwise. The observations of the Hon'ble Delhi High Court in para-10 are reproduced as under: "10. It is common ground that in the present case the Assessing Officer had not received any additional information from any outside source or quarter but the fact that there was no such information did not make any material difference. Action under section 147 was permissible even if the Assessing Officer gathered his reasons to believe from the very same record as had been the subject-matter of the completed assessment proceedings. What Mr. Vohra argued was that the Assessing Officer could not, on the basis of the very same material as was available to him at the time of assessment, initiate action under section 147 for doing so, would constitute action based entirely on a change in his opinion. The contention is

3 ITA No.37/CTK/2019 that if the material was available to the Assessing Officer and if an assessment order based on that material is passed by him, a reassessment using the very same material or inferences available from that material should tantamount to a mere change of opinion, which cannot, according to the petitioner, constitute a valid ground for reassessment". The observations of the Hon'ble Delhi High Court in para-19 are reproduced as under: "- "The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which .the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening computed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion". c) Reliance in this connection is placed on the decision of Hon'ble Mumbai High Court in the case of Yuvraj vs. Union of India (315 ITR 84) wherein it was held in para-10 to para-12 as under:

4 ITA No.37/CTK/2019 "10. We have perused the assessment order passed under section 143(3) of the Income-tax Act, 1961, on January 9, 1998. The Assistant Commissioner of Income-tax, Circle 2(1), Dhule, while passing the assessment order observed in paragraph 3 that the assessee had sold his right to purchase open plot (NA) at Kothrud, Pune, and copy of the agreement of acquisition of right to purchase and deed in respect of right to purchase executed by the builders were filed on record. After saying so the Assistant Commissioner observed that subject to the above remarks the total income was computed as per the chart mentioned in the order. From the perusal of the order we do not find any application of mind on the part of the Assistant Commissioner of Income Tax to the facts of the case, the issue to be dealt with and the reasons for passing the order. The value of the land was not determined by the Revenue. The issue relating to capital gain or casual income was also not addressed by the Revenue. In the light of the same, in the facts of the case, we find that the Assessing Officer was justified in issuing the notice under section 148 of the Act on May 17,2000. 11. Original record was produced before us by Shri Alok Sharma. The Assessing Officer had applied his mind and then passed a reasoned order for issuing notice under section 148. There is no dispute on the pint that mere issuance of notice would not conclude the issue finally. At that stage, it would be sufficient if the Revenue demonstrates that there were good reasons which were recorded by the Assessing Officer by applying his mind. We find that this court shall not interfere at the stage of mere issuance of notice. The petitioner is not remedy-less and all the opportunities which are available to the petitioner in law could be utilized by the assessee. 12. The learned senior counsel submits that as the writ petition was admitted and interim relief was granted the petitioner need not be relegated to the remedies available in law. In a suitable case this argument could have been considered but after a perusal of the assessment order passed under section 143(3) of the Act, we are of the view that the Assistant Commissioner did not apply his mind and failed to record good and proper reasons for passing the order. In the facts of the case, we do not find mere change of opinion in recording reasons for issuing notice under section 148 by the Assessing Officer". Hence this decision was held to be squarely applicable to the facts & circumstances of the present case. d) Reliance is also placed on the decision of Hon'ble Mumbai High Court in the case of Ipca limited vs. DCIT (251 ITR 420) wherein it was held relying on the decision of Hon'ble Gujarat High Court in the case of Praful Chunilal Patel vs. ACIT (236 ITR 832) that where the Assessing Officer has overlooked something at the time of the original assessment, which he ought to have looked into and which has resulted in the income escaping assessment, then reassessment within four years was permissible. It was also held that said case was not based on change of opinion. It was based on

5 ITA No.37/CTK/2019 the Assessing Officer overlooking the meaning of the word "profit" in section 80HHC(3)(c) of the Act. In the present case, the AO had overlooked the fact of receipt of share application money and. source of same had remained unexplained as the assessee company had declared nil information in the various columns as per questionnaire dated 21.01.2015. e) It is therefore urged that unless it is shown that the A.O. had taken a considered view during the completion of original assessment, question of "change of opinion" will not arise. Thus when a issue is not examined by the A.O. or he does not apply his mind to it, then it is a case of "no opinion". f) In the case of CIT vs. National Tyres & Rubbers Co. of India Ltd. (15 taxmann.com 3), it was held by the Hon'ble Kerala High Court that in case involving non-disclosure of primary facts, so long as income chargeable to tax has escaped assessment and Assessing Officer has reason to believe so, whether suo motu found by him from records or whether brought to his notice by audit party or any other agency, he will be justified in revising assessment within period of limitation provided in section 147. It was further held that in such case, it would be immaterial whether escapement was either on account of ignorance of law or omission on part of assessee or Assessing Officer. g) In the following cases, it has been held that where the AO had not examined the issue or did not consider it while completing the assessment, or did not form a positive or considered opinion on it, the issue of notice u/s.148 was justified: i.) Hon'ble Kerala High Court in the .case of Innovative Foods Ltd. vs. Union of India (37 taxmann.com 463) ii.) Hon'ble Mumbai High court in the case of Eleganza Jewellery limited vs. CIT (52 taxmann.com 46) iii.) Hon'ble Gujarat High Court in the case of Jivraj Tea Co. vs. ACIT (68 taxmann.com 105) iv.) Hon'ble Mumbai ITAT in the case of Instant Holdings Ltd. vs. DCIT (44 taxmann.com 386) v.) Hon'ble Kolkata ITAT in the case of Exide Industries Ltd. vs. DCIT (17 taxmann.com 84) vi.) Hon'ble Mumbai IT AT in the case of Hindustan Thompson Associates (P.) Ltd. vs. ACIT (25 taxmann.com 243) In view of above facts & circumstances, the reopening ujs.147 is valid and therefore this ground of appeal is required to be dismissed.

6 ITA No.37/CTK/2019 4. We have considered the submissions and the facts. The assessee has not been able to point where the issue has been considered by the AO in the course of original assessment. The AO having not formed an opinion at all much less have considered this issue in the course of the original assessment and in view of the Explanation 1 to Section 147 of the Act, the reopening of the assessment as done by the AO is held to be valid. Consequently, the additional ground filed by the assessee stands rejected. 5. With regard to merits, it was the submission of the ld. AR that the issue was in respect of Iron Ore Fines of quantity of 4,02,000 MT. It was the submission that as the assessee had shortage of storage space the assessee had stocked the Iron Ore at one of its mines known as Gandhamardan Block-A. The stock was of 4,02,000 MT. This consisting of both Calibrated Lump Ore (CLO) Iron Ore, which is of the highest grade and Iron Ore Fines of various lower grades. It was the submission that the assessee had shown the sale of these 4,02,000 MT of the Iron Ore of the Iron Ore for a sale consideration of Rs.61.08 Crores. It was the submission that the AO on the basis of the break up percentage of the production of the Iron ore for the earlier and subsequent years estimated the stock percentage of fines to CLO at 70:30. It was the submission that as the percentage in respect of stock held at Gandhamardan Block-A was found to be not in this ratio but was found to contain nearly 62 percentage of fines, the AO disbelieved the sale price of the Iron Ore in its entirety in respect of fines from Gandhamardan Block A and estimated the sale price

7 ITA No.37/CTK/2019 of the entire 4,02,000 MT at Rs.4,908/- per MT which was the rate applicable to the CLO Iron Ore. Consequently, the AO arrived at a sale figure of Rs.197.30 crores. 6. At the outset, it was the submission that even assuming that the sales were to be estimated, the AO ought to have applied the ratio that he himself has arrived at but he proceeded to value full 100% as CLO. It was the submission that very primary action of the AO itself was erroneous. It was the further submission that the assessee had produced before the AO, the breakup of the sales of the CLO and the fines of total 4,02,000 MTs of Iron Ore stocked at Gandhamardan Block A. It was the submission that the said chart showed the names, quantity, quality, rate and bill/invoice numbers etc. in respect of each sale along with quantity sold. It was the submission hat no defect in respect of sales had been found and consequently estimating the same by adopting the rate of CLO Iron Ore in respect of fines sold was erroneous and liable to be deleted. 7. In reply, the ld. CIT-DR drew our attention to the notes in the tax audit report in para 2.56 in which it was submitted that the auditors have mentioned 4,02,000 MTs of Iron Ore. It was the submission that no fines have been mentioned there. It was the further submission that in the assessment order at page 5 details such as the monthwise production and the annual production register had not been produced before the AO. It was the submission that no qualitative records was also maintained. The ld. CIT-DR further drew our attention to the assessment order in page 6 wherein the AO talks of the examination of the ledger account of

8 ITA No.37/CTK/2019 one Shri Hardev Steels Pvt. Ltd. and it was the submission that two purchases done by Hardev Steels Pvt. Ltd. on 23.10.2012 were not shown in the record or the chart as submitted by the assessee. It was the submission that the AO had rightly rejected the claim of the inferior fines as the same was not backed by data nor were the same produced before the AO. 8. In reply, the ld. AR placed before us the copy of email sent by the assessee to the DCIT-2(1), Bhubaneswar, wherein the issue of sale of Iron Ore to Hardev Steels has been categorically clarified to have been from Barpada Khasia and not from Gandhamardan Block A. It was further submitted by the ld. AR that the monthly production summary as extracted from the annual production register had been produced before the AO. It was the submission that unfortunately the AO has not recorded the same in his order. 9. We have considered rival submissions. 10. A perusal of the facts of the present case shows that the assessee is a public sector undertaking. The assessee’s accounts are audited by C&AG. They have got internal audit provision also. It is an admitted fact that a production register is a voluminous document. It is practically impossible to produce such register before the AO, however, the assessee has produced the summary of the production register showing the monthly production and the details thereon. Without going into that issues itself, the fact that the defects of the sale more being the statement of the sale of the Iron Ore produced at Gandhamardan Block B and

9 ITA No.37/CTK/2019 stocked at Gandhamardan Block A were before the AO. It contained the date of sale, bill number, contract number, contract date, quantity, name of the buyer, grade of iron ore, rate and value. The assessment order shows that it has been examined and then the AO pulls out the case of Hardev Steels Ltd. which does not relates to the issue in appeal, being the sale from Gandhamardan Block-A. These details having been produced before the AO and the AO having admitted to have verified the same and no defect having been found nor pointed out in respect of this statement of sale of Iron Ore produced from Gandhamardan Block-B and stocked at Gandhamardan Block-A, it is absolutely erroneous on the part of the AO to adopt a derived percentage between the Calibrated Lump Ore and fines on the basis of production details of the earlier years and apply it to the stocked Iron Ore at Gandhamardan Block A. It should be appreciated that mining activity is an activity involving digging of the land. The land does not contain homogenous mixtures of calibrated lump ore and fines. Percentage vary from area to area and depth. Thus, it cannot be said that a derived percentage on the basis of earlier production should be an acceptable position. The AO having not found any defect in the statement of sale of iron ore produced from Gandhamardan Blcok B stocked at Gandhamardan Block-A and also on account of the fact that the assessee has categorically proved before the AO that the alleged sale of iron ore to M/s Hardev Steels Ltd. was not from Gandhamardan Block A, we are of the view that the estimate as done by the AO and the

10 ITA No.37/CTK/2019 consequential addition made and as confirmed by the ld.CIT(A) is unsustainable and the same stands deleted. 11. In the result, appeal filed by the assessee is partly allowed. Order dictated and pronounced in the open court on 21/06/2022. Sd/- Sd/- (अरुण खोड़पऩया) (जाजज माथन) (ARUN KHODPIA) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 21/06/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. M/s Orissa Mining Corporation Ltd., OMC House, Bhubaneswar-01 2. प्रत्यथी / The Respondent- Pr.CIT-1, Bhubaneswar आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, 5. ITAT, Cuttack गार्ज पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यापऩत प्रयत //True Copy// (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack