2015 (3) TMI 1019 - AT - Income Tax

Tribunal upholds decision on concealed sales and excise duty, dismissing revenue's appeal.

M/s. Pushp Enterprises Versus Asstt. Commissioner of Income Tax, Circle-4, Jaipur

M/s. Pushp Enterprises Versus Asstt. Commissioner of Income Tax, Circle-4, Jaipur - TMI Issues Involved:1. Addition on account of concealed sales of scrap.2. Addition on account of concealed sales.3. Addition on account of excise duty on sale of scrap.Detailed Analysis:1. Addition on Account of Concealed Sales of Scrap:The Assessing Officer (AO) added Rs. 1,35,56,787 to the assessee's income, alleging concealed sales of scrap. The AO observed that the assessee paid excise duty on scrap but did not show corresponding income from its sale. The assessee argued that the scrap generated by job workers was retained by them as per trade practice, which was reflected in job work charges. The AO did not accept this explanation, citing lack of evidence and potential profit transfer to related parties. The CIT(A) deleted the addition, noting that the ER-1 form was for excise duty purposes and not actual sales. The CIT(A) also observed that there was no requirement for scrap to be returned to the manufacturer post-01/04/2000 as per CENVAT rules. The Tribunal upheld the CIT(A)'s decision, finding no evidence of unaccounted sales or scrap being returned to the assessee.2. Addition on Account of Concealed Sales:The AO added Rs. 2,33,96,017, including the Rs. 1,35,56,787 for scrap, alleging understated sales. The main customer, SKF India Ltd., often rejected goods leading to adjustments in invoices. The assessee provided detailed reconciliations and confirmations from SKF, which the AO ignored. The CIT(A) found that the AO made a double addition by including the scrap amount twice and accepted the assessee's reconciliation, reducing the addition to Rs. 1,76,179 for a claim from the previous year. The Tribunal upheld the CIT(A)'s decision, agreeing that the differences were due to genuine business adjustments and supported by documentary evidence.3. Addition on Account of Excise Duty on Sale of Scrap:The AO disallowed Rs. 19,13,583 claimed by the assessee for excise duty on non-returnable scrap, arguing that no scrap sales were shown. The assessee contended that excise duty was payable on scrap generated at both its and job workers' premises, even if not sold. The CIT(A) allowed the claim, citing Rule 4(6) of the Central Excise Rules, which mandated excise duty on notional scrap value. The Tribunal upheld this decision, recognizing the statutory nature of the liability and its allowance as a business expense.In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s deletions of the additions on all three grounds. The judgments emphasized the statutory requirements, trade practices, and lack of evidence for the AO's claims.