JUDGMENT

Dama Seshadri Naidu, J. - Facts:

Respondent-Assessee Company mines and exports iron ore, besides dealing in shipping and shipbuilding, manufacturing and selling low-ash metallurgical coke. In September 2009, it filed its return declaring a total income of Rs. 2007,48,80,920/-. The appellate Department processed the return of income under section 143 (1) and took the case up for scrutiny. First, ACIT, Circle-I, Panaji, notified the assessee under section 143 (2) of Income Tax Act. Later, the case was assigned to the Joint Commissioner of Income Tax, Range-1, Panaji, who issued a notice under section 129 of the Act in August 2011. In response to the notices, the assessee furnished information and produced the relevant documents.

2. Eventually, on 30.12.2011, the Assessment Officer did the following:

(a) Disallowed expenditure of Rs. 12,29,25,049/- under section 14A of the IT Act, read with Rule 8D of IT Rules;

(b) Declared that the assessee was ineligible for deduction of expenditure incurred on 'Scientific Research and Developments' (R&D) under section 37 of Act. So, the AO disallowed the expenditure of Rs. 1,94,55,376/- and added it back to the profit and loss account;

(c) Fol