2015 (12) TMI 1239 - AT - Income Tax

Tribunal reverses additions for alleged suppression of sales, stresses need for concrete evidence

M/s. Meta Rolls and Commodities Pvt. Ltd. and Others Versus The Asst. Commissioner of Income Tax, Circle-1, Aurangabad and others and vica-versa

The Tribunal overturned the additions made regarding alleged suppression of production and sales due to erratic electricity consumption. The rejection of ... Addition made on account of suppressed production and sale - Held that:- The addition in the hands of assessee was made on the basis of erratic consumption of electricity vis-à-vis production on the basis of Article written by Dr. N.K. Batra, Professor, IIT, Kanpur. No evidence was found against the assessee of having clandestinely removed the goods without payment of Excise duty in the instant assessment year, though in assessment years 2006-07 to 2008-09, the Commissioner of Central Excise and Customs, Aurangabad had passed an order on evasion of Excise duty by the steel manufacturers in Jalna District, in turn found by the DGCEI for the said year. However, the said addition was deleted by the Third Member of CESTAT. Further, in assessment year 2009-10, the Commissioner of Central Excise and Customs has passed an order on the basis of consumption of electricity, which in turn, was deleted by the Division Bench of CESTAT. The Tribunal in assessee’s own case had heard similar issue in cross appeals relating to assessment years 2006- 07 to 2008-09 had deleted the addition, in the absence of any evidence found by the Income–tax Department against the assessee for the alleged suppressed production and sales and held that there was no merit in the aforesaid addition worked out on the basis of monthly variation in consumption of electricity. Further, in assessment year 2009-10, the Tribunal had also deleted the addition, in view of the physical verification having been carried out by the Excise authorities, wherein it was found that there was in fact higher consumption of electricity than the report of Dr. Batra. In the instant assessment year i.e. 2010-11, there is no order of Commissioner of Central Excise and Customs and there is no evidence of any clandestine removal of goods without payment of Excise duty, found against the assessee. In the entirety of the above said facts and circumstances, there is no merit in any addition in the hands of assessee, in view of the finding of Tribunal in assessee’s own case - Decided in favour of assessee. Issues Involved:1. Alleged suppression of production and sales.2. Basis of addition on erratic electricity consumption.3. Rejection of books of accounts under Section 145 of the Income Tax Act, 1961.4. Application of Gross Profit rate on alleged suppressed sales.5. Investment in purchases related to suppressed sales.6. Non-issue of notice under Section 143(2) after reopening under Section 147.7. Adherence to past tribunal decisions.Detailed Analysis:1. Alleged Suppression of Production and Sales:The primary issue was whether the assessee had suppressed production and sales amounting to Rs. 5,91,31,377/-. The CIT(A) confirmed the addition based on the order of the Commissioner of Central Excise and Customs, Aurangabad, which relied on electricity consumption data and an article by Dr. N.K. Batra. However, no direct evidence of purchase of raw materials or sales of finished products outside the books was found.2. Basis of Addition on Erratic Electricity Consumption:The addition was made based on erratic electricity consumption vis-`a-vis production, as per the article by Dr. N.K. Batra. The Tribunal noted that similar additions for earlier years (2006-07 to 2008-09) were deleted by the Tribunal, and the Commissioner's order was overturned by the CESTAT. For the assessment year 2010-11, no order of the Commissioner of Central Excise and Customs was present, and no evidence of clandestine removal of goods was found.3. Rejection of Books of Accounts under Section 145:The CIT(A) upheld the rejection of the assessee's books of accounts under Section 145 of the Act, citing erratic electricity consumption. The Tribunal found no merit in this rejection as no evidence was found to support the alleged suppression of production and sales.4. Application of Gross Profit Rate on Alleged Suppressed Sales:The CIT(A) confirmed the addition of Gross Profit @ 4% on the alleged suppressed production and sale amounting to Rs. 23,65,255/-. The Tribunal, following its earlier decision, found no merit in this addition due to the lack of evidence supporting the alleged suppression.5. Investment in Purchases Related to Suppressed Sales:The CIT(A) made an addition for alleged investment in purchases related to suppressed sales. The Tribunal, having deleted the primary addition on suppressed sales, found no basis for this related addition.6. Non-Issue of Notice under Section 143(2) After Reopening under Section 147:The issue of non-issue of notice under Section 143(2) after reopening the assessment under Section 147 was raised. However, this issue was dismissed as academic in light of the deletion of the primary addition.7. Adherence to Past Tribunal Decisions:The Tribunal adhered to its past decisions in similar cases, including the case of M/s. SRJ Peety Steels Pvt. Ltd., where similar additions were deleted. The Tribunal reiterated that no addition could be made based on erratic electricity consumption without concrete evidence of suppression of production and sales.Conclusion:The Tribunal deleted the additions made on account of alleged suppression of production and sales based on erratic electricity consumption. The rejection of books of accounts under Section 145 and the application of Gross Profit rate on alleged suppressed sales were also overturned. Consequently, related additions for investment in purchases were dismissed. The Tribunal upheld the principle that without concrete evidence, additions based on assumptions and presumptions could not be sustained.