PCIT (Central) Vs Tarini Minerals Pvt. Ltd. (Orissa High Court)
Orissa High Court has dismissed an appeal filed by the Principal Commissioner of Income Tax (Central) against Tarini Minerals Pvt. Ltd., pertaining to assessment years 2008-2009 to 2010-2011. The revenue had appealed an order by the Income Tax Appellate Tribunal (ITAT), Cuttack Bench, which had ruled in favor of the assessee. The core of the dispute revolved around allegations of illegal mining by Tarini Minerals due to the absence of statutory clearances and the subsequent reopening of assessments under Section 147 of the Income Tax Act, 1961.
The revenue’s primary contention was that the ITAT erred in upholding the first appellate authority’s decision, which had gone against the Assessing Officer’s (AO) reassessment. The revenue argued that the assessee had suppressed production details related to its mining activities, which were deemed illegal due to the lack of necessary statutory clearances. Furthermore, the revenue challenged the ITAT’s decision to delete the addition of expenditure made during the reassessment, citing Explanation (1) under Section 37(1) of the Income Tax Act, which disallows expenses incurred for illegal purposes.
However, the High Court sided with the ITAT’s findings. The tribunal had noted that the first appellate authority had meticulously examined Form H-1, submitted by the assessee to the Indian Bureau of Mines regarding iron ore production. This examination revealed that the same production figures were reported by the assessee in its audit report in Form 3CD. Based on this, the ITAT concluded that there was a concurrent finding of fact, free from any perversity, indicating no suppression of production. The High Court concurred with this view, stating that no substantial question of law arose from such a concurrent factual finding.
Regarding the disallowance of expenditure under Section 37(1), the High Court again upheld the ITAT’s decision. The tribunal had agreed with the first appellate authority that the assessee had not claimed any expenditure related to penalties imposed for alleged statutory violations. The assessee had relied on a report by the Central Empowered Committee (CEC), formed pursuant to the Justice M.B. Shah Commission’s report on illegal mining. The CEC’s report, specifically on page 29, contained an observation that mineral produced without environmental clearances or beyond prescribed limits does not automatically fall under the category of “illegal mining” for the purpose of Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957. The High Court noted that the revenue could invoke Explanation (1) under Section 37(1) in the future if the mining activity is definitively declared illegal, a penalty is imposed, and the assessee claims it as an expenditure. However, based on the current records, there was no conclusive evidence that the activity stood declared illegal. Consequently, the Orissa High Court found no substantial question of law arising from the ITAT’s order and dismissed the revenue’s appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
