TaxTMI 
TaxTMI 
2011 (6) TMI 683
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....ct. 2. That the learned Commissioner of Income-tax (Appeals) has erred in law and facts in deleting the addition of Rs. 32,59,650 made on account of profit earned by the assessee. 3. That the learned Commissioner of Income-tax (Appeals) has erred in law and fact in allowing additional evidence (certificate regarding capacity of furnace) which was objected by the Assessing Officer but admitted by the learned Commissioner of Income-tax (Appeals). 4. That the order of the learned Commissioner of Income-tax (Appeals) be set side and that of the Assessing Officer be restored. The aforesaid appeal was earlier disposed of by this Tribunal on July 11, 2008 by which the Issues raised in appeal were restored to the file of the Assessing Officer for fresh decision after the final outcome of the proceedings initiated by the Customs and Excise Department. The aforesaid order passed by this Tribunal was challenged before the hon'ble High Court upon which the said order passed by this Tribunal was set aide by the hon'ble court vide its order dated October 23, 2009 in I. T. A. No. 461/2009 and the appeal restored to this Tribunal, with the following directions: "4. Lea....
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....2003 to March 24, 2004. Statement of Shri Harmesh Arora, director in the assessee-company, as recorded by the Superintendent (Preventive), Central Excise Commissionerate, Ludhiana, on March 25, 2004 reads as under : "Before tendering this statement, I have been explained the provisions of section 14 of the Central Excise Act, 1944 and I understand that I have to tender a true and correct statement and this statement of mine can be used against me, my firm, any other person or any other firm in any Departmental or judicial proceedings anywhere in India. Today, i.e., on March 25, 2004, the Central excise staff visited our unit. At the time of the visit, I was present in the factory premises. On being asked, I state that there was no production during the intervening night of March 24, 2004 and March 25, 2004 due to fault in the furnace and the furnace was restarted in the morning at 0550 hrs and by the time of visit only one heat was tapped on 8.20 hrs. On demand, I produced all the Central excise records before the Central excise staff, which was written up to date. On being asked I state that we are engaged in the manufacture of non-alloys steel ingots and are ....
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....cess stock of non-duty paid scrap by 5 mts. On being asked I state that the stock of excess non-duty paid scrap was not accounted for in our records as the same was to be used in the manufacture of ingots to be produced beyond our declared capacity of 4 mts. On being state that we purchase the scrap to be used in the excess production on daily basis. The stock of steel ingots was also verified which was found to be tallied with the record balance. I am fully satisfied with the manner of physical verification, which has been done in my presence and with the help of my labour, and truck No. PB-10K-9666. I have signed the physical verification chart and weighment slips in token of its correctness and acceptance. The staff got the excess scrap entered in the form IV register. This is my true and correct statement, which I have tendered voluntarily without any fear of pressure. This statement of mine has been typed by Shri Kishori Lai, accountant of our factory on the computer installed in my factory and I have read the same and have put my dated signatures on the same. I have retained a copy of my statement." The aforesaid statement recorded by the Central excise authoritie....
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.... the assessee was showing less production and has purchased the raw material in cash and sold the finished products too in cash, not recorded these in its books of account. The quantity of finished product so produced and sold is 624 mts. the sale value of which is Rs. 1,02,19,021. The raw material for this was purchased by the assessee outside the books of account from sources not disclosed. Accordingly that constitutes unexplained expenditure of the assessee. The cost of this raw material comes to Rs. 69,59,370 which has been calculated as below : Quantity of production 624 mts % of yield of raw material 94.14% Consumption of raw material 624 94.14% 662.84 mts. Cost of raw material per mt 98081418 9341.690 Rs. 10499.32 per mt. Cost of raw material of 662.84 mts Rs. 69,59,370 Accordingly this amount of Rs. 69,59,370 is added to the income of the assessee as unexplained expenditure incurred in the purchase of raw material under section 69C of the Income-tax Act. Penalty proceedings under section 271(1)(c) for concealment of income are being initiated separately. ....
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....nd therefore the learned Commissioner of Income-tax (Appeals) was not justified in deleting the impugned addition on the basis of the order passed by the Commissioner (Appeals), Central Excise and Customs. The aforesaid submission was noted by this Tribunal in paragraph 4 of its order dated July 11, 2008. This Tribunal set aside the order of the learned Commissioner of Income-tax (Appeals) and restored the matter to the file of the Assessing Officer to decide the matter afresh in the light of the final outcome in the Central excise proceedings. As already stated earlier, the aforesaid order passed by this Tribunal, on appeal by the Department, has been set aside by the hon'ble High Court and the matter restored to the Tribunal for a decision on merits. Pursuant to the aforesaid directions, the appeal filed by the Department was restored and the matter was accordingly heard afresh. In support of the appeal, the learned Departmental representative relied upon the order passed by the Assessing Officer. He submitted that the submissions of Shri Harmesh Arora, director in the assessee-company, as recorded by the Central excise authorities was a strong piece of evidence and theref....
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....ntaining copies of (i) written submissions filed before the Commissioner of Income-tax (Appeals) ; (ii) reply filed by the assessee before the Commissioner of Income-tax (Appeals) to the remand report submitted by the Assessing Officer ; (iii) the directions issued by the Additional Commissioner of Income-tax under section 144A in the assessment year 2005-06 ; (iv) the order of the Commissioner (Appeals), Customs and Central Excise ; and the audited accounts for the assessment year 2004-05. 3. Paper book-II : assessment year 2004-05 (31 pages) containing (i)copy of reply to the Assessing Officer's letter, dated August 3, 2007 as filed before the Commissioner of Income-tax (Appeals) ; (ii) copy of circular, dated March 10, 2003 issued by the Central Board of Direct Taxes ; (iii)copies of judgment/orders in CIT v. S. Khader Khan Son [2008] 300 ITR 147 (Mad) ; 214 CTR (Mad) 589 ; CIT v. Vimal Moulders (India) Ltd. judgment dated January 14, 2010 in I. T. A. No. 1418 of 2009 [2011] 330 ITR 214 (Delhi) ; CIT v. Vignesh Kumar Jewellers [2011] 330 ITR 209 (Mad); [2008] 12 DTR (Mad) 293, CIT v. Somani Pilkingtons's Ltd. [2004] 266 ITR 388 (P&H), CIT v. Sulabh Marbles P. Lt....
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....eby assuming that the appellants had been using the furnace with capacity of 5 mts as per heat during the period from December 2003 to March 24, 2004. They submitted that they had actually been using induction furnace with production capacity of 4 mts per heat only and had actually produced 37 ingots in last heat tapped at 0820 hours on March 25, 2004 and entered the production of 37 ingots only In their log sheet as they had been making entries of production in their statutory records as per the actual production of steel ingots. They explained that the balance 8 ingots pertained to the previous days' heats and were rejected/defective ingots lying there for remelting. This explanation appeared to have been accepted by the central excise officers as otherwise they would have seized these 8 ingots allegedly not entered in the log sheet. Since no action had been taken in respect of these 8 ingots by the central excise officers, it can be concluded that the appellants had been operating induction furnace with production capacity of 4 mts per heat only. I fully agree with this contention of the appellants and find force in the appellants' contention. If the central excise ....
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....legations of removal of goods without payment of duty do not sustain and the impugned order merits to be quashed out rightly. In support of this submission, the appellants placed reliance upon the following judgments of the Appellate Tribunal : (a) Rawalwasia Ispat Udyog Ltd. v. CCE reported as 2005 (186) ELT 465 (Trib-Delhi) ; (b) CCE v. Harcharan and Brothers reported as 2004 (168) ELT 454 (Trib-Delhi) ; (c) Ess Vee Polymers P. Ltd. v. CCE reported as (165) ELT 291 (Trib) ; (d) Rajasthan Foils P. Ltd. v. CCE reported as (69) RLT 131 (CESTAT-Delhi) ; and (e) Rama Shyama Papers Ltd. v. CCE 2004 (168) ELT 494 (Delhi). Wherein it has been held that in the absence of any independent unimpeachable evidence, such as, any material/evidence showing purchase of raw materials/excess consumption of electricity/transport and delivery of goods, to consignees/payment for the goods, etc., the charges of clandestine manufacture and removal are not proved and demand for duty is not sustainable. In the present case also I find that the alleged allegations of clandestine manufacture and removal of steel ingots have remained uncorroborated by any ....
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....st the party making it and, though not conclusive, shifts the onus on to the maker on the principle that "what a party himself admits to be true may reasonably be presumed to be so and until the presumption was rebutted the fact admitted must be taken to be established". It has been held in Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi, AIR 1960 SC 100, 105 that an admission is the best evidence that an opposing party can rely upon and though not conclusive, is decisive of the matter unless successfully withdrawn or proved erroneous. The legal position that emerges from catena of authorities on the subject is that the proposition that an admission is decisive of the matter is subject to four qualifications, namely, (1) the admission must have been voluntarily made ; an admission cannot be acted upon unless the facts available on record show that it was voluntarily made ; (2) the admission must be clear and unequivocal ; (3) an admission cannot be acted upon if it is proved by the person making it that it is incorrect or erroneous ; and (4) an admission cannot be acted upon if it is inconsistent with the materials available on record. Unless an admission falls und....
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....ts only. Further as already mentioned this is not possible that the appellant had installed a 5 mts. furnace during the previous year relevant to the assessment year under consideration and that, however, furnace of 4 mts. had been installed before and after that period. Also there is nothing on record that the appellant incurred any expenses for removal and installation of the furnace as above and that the sanctioned load during the relevant period was more than 2250 kw. which is a must for using 5 mts furnace . . ." In our view, the view taken by the learned Commissioner of Income-tax (Appeals) is reasonable on the facts of the case. The entire addition has been made on the basis of the statement of Shri Harmesh Arora as recorded by the Central excise authorities in which he stated that the capacity of furnace was increased from 4 mts to 5 mts in December 2003. Capacity of furnace is not a matter within the domain of personal knowledge of the assessee ; rather it is an objective fact which is capable of verification and proof by direct evidence. Following facts available on record establish that the capacity of furnace was not 5 mts. but 4 mts. (i) Perusal of the....
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....as the suppressed production was worked out till March 25, 2004 which means that it was accepted thereafter, i.e., after March 25, 2004, that the melting capacity of the furnace was 4 mts. This sounds quite illogical. (v) Field inspection was carried out by the Central excise authorities on November 25, 2005 and a report to that effect has been recorded in the daily stock account. It is stated in the said report that "the unit has installed 4 mts furnace". No material has been placed before us to rebut the aforesaid report. (vi) Though the inspection was carried out by the Central excise authorities on March 25, 2004 also at the premises of the assessee, there is nothing in the assessment order to show that the inspection report prepared, if any, by the Central excise authorities was at all considered by the Assessing Officer. It has also not been placed before us either. There is absolutely no material before us to show that the Central excise authorities had at all made any attempt to verify the melting capacity of the furnace during the course of their inspection on March 25, 2004. (vii) The Assessing Officer has placed no material on record to show th....
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....me so as to advance the cause of justice. Opportunity was given by the Commissioner of Income-tax (Appeals) to the Assessing Officer to rebut the additional evidence filed by the assessee before the learned Commissioner of Income-tax (Appeals). The Assessing Officer however chose not to rebut them. He simply sought to place reliance on the assessment order. The learned Commissioner of Income-tax (Appeals) had no option except to act upon the additional evidence filed by the assessee. In view of the foregoing the order passed by the learned Commissioner of Income-tax (Appeals) in this behalf is confirmed. Ground No. 3 taken by the Department is dismissed. Apropos Ground No. 4, the order of the Commissioner of Income-tax (Appeals) on the first three grounds of appeal has already been confirmed by us and hence the order of the Assessing Officer cannot be restored by us. Ground No. 4 is dismissed. In view of the foregoing, the appeal filed by the Department is dismissed. I. T. A. No. 1048/Chandi/2008 : assessment year 2005-06 : As stated earlier, the appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income-tax on November 20, 2....
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....6. That the learned Commissioner of Income-tax's finding in paragraph 3.5 with regard to unrecorded production and purchase of raw material outside the books of account and production and sale as per books of account is totally uncalled for, both on facts and on legal ground, since there is no mention of the same in the notice issued under section 263 and it is wrong on the part of the learned Commissioner of Income-tax to state that there was an error of evaluation of evidence by the Assessing Officer. 7. That for exercising a jurisdiction under section 263, the assessment has to be both erroneous and prejudicial to the interests of the Revenue which in our case considering the above said grounds of appeal, condition to work only section 263, not satisfied." Briefly stated, the facts of the case are that the assessee filed its return of income on October 24, 2005 returning nil income. After processing the return under section 143(1), assessment under section 143(3) was completed on December 31, 2007 in which addition of Rs. 50,000 was made on agreed basis on account of unvouched expenses. The assessment order passed by the Assessing Officer on December 31, 2007 rea....
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....w of the above discussion following findings of fact and law do emerge : (a) That in the assessment year 2004-05 the Assessing Officer has decided that the installed capacity of the furnace was 5 mts. on the basis of statement of Shri Harmesh Arora and verification chart of ingots manufactured out of heat at 08:20 hrs on March 25, 2004. (b) That in the absence of any evidence to the contrary produced during the assessment proceedings for the assessment year 2005-06 and though there was being no material change in factual position while passing the order for the assessment year 2005-06 the installed capacity has been accepted at 4 mts. (c) That the said decision not being based on new material evidence on record is erroneous. Moreover since the issue has been decided without adducing evidence as discussed in paragraph 3.3 above, the same is held to be not based on material on record. (d) That the said adjudication without raising evidence, tough it was imperative to decide the issue to its finality and ignoring the material evidence on record, left the order of assessment erroneous. (e) That since the issue, i.e., unrecorded purchase of r....
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....31, 2005. 3. No cognizance of a confessional statement can be stretched to subsequent years until unless there is some material on record. 4. No addition is sustainable and justified on the basis of installed capacity of a unit, particularly when it is an excisable unit maintaining all details of sales and purchases, except in rase of any evidence on record reflecting unaccounted transactions for that financial year. Further the 100 per cent. capacity utilisation in continuous process industry, like furnaces which are highly uneconomical to run on alternate power sources like generator, etc., is never possible. This position further gets worsened by the fact that in States like Punjab where power cuts are a common phenomena, the capacity utilisation is even much lower than the utilisation in normal circumstances. 5. The issue with Central excise authorities has been decided in favour of assessee by the first appellate authority for the financial year 2003-04 and the same department has certified the capacity of the assessee's furnace at four ton only during the financial year 2004-05. In totality of the facts in this case, I am of the opinion tha....
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.... (13) CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) ; (14) CIT v. Design and Automation Engineers (Bombay) P. Ltd. [2010] 323 ITR 632 (Bom) ; (15) CIT v. Ganpat Ram Bishnoi [2008] 296 ITR 292 (Raj) ; (16) Gujarat Guardian Ltd. v. Deputy CIT 11 DTR (Delhi-Trib) 370 ; (17) Jet Electronics v. Asst. CIT [2008] 2 DTR 337 (Ahd-Trib) ; (18) Pargat Singh v. ITO [2005] 95 TTJ (Chand) 295 ; (19) Smt. Anita Malpotra v. ITO [2007] 109 TTJ (Amritsar) 76 ; (20) Mrs. Khatiza S. Oomerbhoy v. ITO [2006] 100 ITD 173 (Mumbai); (21) Salora International Ltd. v. Addl. CIT [2005] 2 SOT 705 (Delhi) ; and (22) CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). In reply the learned Departmental representative supported the order passed by the learned Commissioner of Income-tax. We have heard both parties and carefully considered their submissions. Bare reading of section 263 makes it clear that pre-requisite to the exercise of jurisdiction by the learned Commissioner of Income-tax suo motu under it is that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue.....