TaxTMI 
TaxTMI 
2015 (10) TMI 2303
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowing grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the alleged suppression of sales of Rs. 4,54,13,116/-. 2. The learned Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppression of sales merely on the basis of the consumption of electricity as per U.S. Standard and evasion of excise duty by TMT Bars manufacturers in Jalna cluster found by Director General of Central Excise and Customs. 3. The learned Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppression of production on the grounds of monthly variation in consumption pattern of electricity vis a vis production. 4. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in holding that the books of accounts of the appellant company are correctly rejected u/s. 145 of the Income Tax Act without any evidence or finding as to how the provisions of Section 145(3) are satisfied. 5. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in making an addition on account of alleged suppression of sales witho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT(A) has erred in lowering the GP addition ignoring the fact that, imaginary unaccounted manufacturing expenses cannot be allowed as deduction as per the provisions of section 69C of the Act. 5. Any other ground that may be urged at the time of hearing. 5. Briefly, in the facts of the present case, the assessee was engaged in the business of manufacturing of TMT Bars from MS Ingots / billets. Search and seizure action under section 132(1) of the Act was conducted in the case of Kalika group of Jalna including the assessee company on 16.06.2009. During the course of search, statement of director Mr.Ghanshyam Goyal was recorded under section 132(4) of the Act and an offer of additional income of Rs. 14,30,95,471/- was made in the hands of director of assessee company. The Assessing Officer thereafter, issued notice under section 153A of the Act for assessment years 2004 -05 to 2009-10. The assessee in compliance thereto, filed returns of income and also filed the return of income under section 139(1) of the Act relating to assessment year 2010-11. The Assessing Officer during the course of assessment proceedings, noted that the assessee was engaged in the business of TMT Bars fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tra and others and also to the order of CESTAT dated 28.02.2011, wherein it was observed that auxiliary load cited by the assessee was static in nature and could not be the cause of high electricity consumption. In the absence of G-7 form being maintained by the assessee, the Assessing Officer held that the reasons for variation in electricity consumption were not justified as claimed by the assessee. The Assessing Officer in view thereof, estimated the suppressed production in the hands of assessee on the basis of data relied upon by the Central Excise Commissioner (CEC), Aurangabad and rejected the books of account of the assessee under section 145(1) of the Act. The Assessing Officer thereafter, computed the production in the hands of the assessee on the basis of production shown as per Excise records and electricity consumption @ 188 units per MT and income was estimated in the hands of the assessee from year to year. 7. The CIT(A) in the consolidated order passed in the case of assessee after considering orders of Assessing Officer and the submissions of the assessee against each aspect of the assessment order, called for remand report and held that there was suppression of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the said income. The CIT(A) noted that in the hands of four persons, the total declaration of Rs. 2.80 crores was made by the said persons in assessment years 2006-07 to 2008-09. The details of the profit of the companies of group on suppressed production sold also worked out to Rs. 2.80 crores. The claim of the assessee before the CIT(A) was that since it had offered to tax the above additional income in the statement recorded under section 132(4) of the Act and also in the returns of income on account of undisclosed profit, which was to be telescoped against the addition on account of profit on alleged suppressed production sold. The CIT(A) noted that the said income was offered to tax in the hands of directors / individuals out of undisclosed income earned by the flagship companies including the assessee company. From the details of income offered to tax by Kalika group, the CIT(A) further noted that no income was offered to tax in the hands of the assessee company. Therefore, the CIT(A) held that no telescoping was to be allowed in the hands of the assessee. Hence, contention of the assessee about telescoping of the income offered to tax in individual capacity against the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und of appeal No.6 is aggrieved by the application of GP rate of 4% on the alleged suppression of sales. Vide ground of appeal No.7, the issue raised is against non-following the order of Tribunal in Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune). By way of ground of appeal No.8, the assessee has challenged the passing of order under section 143(3) r.w.s. 153A of the Act , even though no incriminating material or evidence was found during the course of search. This ground of appeal raised by the assessee is not pressed. Vide ground of appeal No.9, the issue is against 5/6 show cause notices issued by the DGCEI discussed by the Assessing Officer in the assessment order, wherein two show cause notices were settled before the Settlement Commission and two show cause notices were decided before the CESTAT and one show cause notice was accepted and another show cause notice was accepted on the basis of order passed by the Commissioner (Appeals) of Excise. Though the assessee has raised similar grounds of appeal, but in some of the appeals, the reference to numbers of grounds of appeal raised are at variance. However, the issues raised are similar. The first issue being addit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... notices issued by the Excise Department were found and the Assessing Officer had show caused the assessee to explain the same. The Assessing Officer had made the addition on suppressed production and sale on estimation of consumption of electricity at 188 units per MT. In respect of six show cause notices issued by the Excise authorities, the assessee in the written submissions filed, explained as under:- "8. We have now filed a complete statement showing the final result of the SCNs at Page No.1 from which your honour will find as under:- 1. The SCN at S.No.1 is settled before the Settlement Commission together with other parties and the order of Settlement petition is given at Page No.855 - 860 of Paper Book Volume 5. The GP @ 4% on the quantity involving total sale value of Rs. 1,32,25331/- comes to Rs. 5,29,013/- which is to be now included in the income of the assessee for assessment year 2007-08. 2. The SCN at S.No.2 is settled before the settlement commission together with other parties and the order of the settlement petition is given at Page No.855 - 860 of Paper Book Volume 5. 3. The SCN at S.No.3 is pending before the CESTAT of Ex cise and the appeal filed before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned Departmental Representative for the Revenue pointed out that vide grounds of appeal No.1 and 2, the issue was against the addition restricted by the CIT(A) by applying GP rate of 4% on the suppressed sales. The learned Departmental Representative for the Revenue pointed out that vide ground of appeal No.3, the Department has challenged that GP rate of 15% as admitted by the director in the statement recorded under section 131 of the Act on 17.08.2009 should be applied. The learned Departmental Representative for the Revenue thus, stressed that in case GP rate is to be applied, then the same should be applied @ 15% since the assessee by clandestine removal of goods has evaded the payment of Excise duty and hence, the margins of profits were higher in the hands of assessee. 16. The learned Authorized Representative for the assessee in reply, pointed out that there was no merit in the grounds of appeal raised by the Revenue, in view of deletion of addition made by the Tribunal in the case of Shree Om Rolling Mills Pvt. Ltd. (supra). Further, the learned Authorized Representative for the assessee pointed out that director of assessee company though had stated that it would be reas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....notice Nos.1 and 2, the learned Authorized Representative for the assessee pointed out that the profits worked out by applying GP rate of 4% on clandestine removal of goods resulting in unaccounted production and sales could be added in the hands of assessee. The learned Authorized Representative for the assessee fairly admitted that the profit on the clandestine removal of goods as admitted by the assessee before the Excise authorities by way of Settlement Commission or otherwise, is to be added in the hands of assessee as directed by the Tribunal in appeals in group of furnace cases. 17. We have heard the rival contentions and perused the record. The issues arising in the present cross appeals filed by the assessee and the Revenue are against the addition made on account of suppressed production worked out on the basis of electricity consumption at 188 units per MT as per the report of Dr. Batra. The Excise authorities had issued various show cause notices to the assessee for the respective assessment years and on the basis of the allegation of Excise authorities, vide said show cause notices, the Assessing Officer made additions in the hands of assessee on account of clandestin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se notices issued by the Excise Department. Against the first and second show cause notices issued by the Excise Department, the assessee had filed petition before the Settlement Commission, in which it had admitted to clandestine removal of certain goods without payment of Excise duty. The assessee admittedly, had not offered the profit on such clandestine removal of goods in its returns of income and the Tribunal had directed the Assessing Officer to add the aforesaid profits in the hands of assessee in the respective years by applying GP rate of 4% and where GP rate shown was more than such GP rate. Under the third show cause notice issued to the assessee and also against the fifth show cause notice issued to the assessee, matter is pending before the CESTAT and as per the admission of the learned Authorized Representative for the assessee in case, the CESTAT decide s the issue against the assessee, then the profits on such alleged excessive production can be added in the hands of assessee by applying GP rate of 4%. The fourth show cause notice issued to the assessee was relating to the sales made to M/s. Balaji Steel Traders in assessment year 2008-09 and the learned Authorized....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd by Director General of Central Excise and Customs; and working out the addition by applying GP rate of 4% on the alleged suppression of sales, after rejecting the books of account under section 145 of the Act. d) Addition made on account of investment in purchases relating to suppression of sale. 51. The Revenue on the other hand, is in appeal against the order of CIT(A) on the following grounds:- a) In quantifying the suppressed production @ 4% as against the addition made by the Assessing Officer on account of the total suppressed production, where the assessee was found to be indulging in clandestine removal of goods without payment of Excise duty; and b) Allowability of manufacturing and administrative expenses on the unaccounted production worked out by the Assessing Officer. 52. The steel group of cases were heard from day-to-day on various dates and the arguments of both the learned Authorized Representative for the assessee and the Ld. special AR were heard along with written submissions, Notes filed by them and the compilation of case laws relied upon by the respective Authorized Representatives. It may be put on record that the issues raised by the different ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....., (supra) which is a sister concern of Shree Om Rolling Mills Pvt. Ltd., we find that the same are identical. We called for appeal folder of M/s. SRJ Peety Steels Pvt. Ltd. (supra) and found that the arguments raised by the Ld. Special AR in the case of the present assessee before us were repeated by the Ld. Special AR. Though the case of the learned Authorized Representative for the assessee was that the issue raised in the present appeal was identical to the issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra). However, the Ld. Special AR stressed that the issue was at variance and made elaborate submissions. It may be put on record that M/s. SRJ Peety Steels Pvt. Ltd. (supra) is a case of furnace, which is engaged in the manufacture of ingots / billets, whereas manufacturing of TMT bars is carried out by Shree Om Rolling Mills Pvt. Ltd. by using ingots / billets. In the case of M/s. SRJ Peety Steels Pvt. Ltd. (supra), there was an order of Central Excise Commissioner, Aurangabad in relation to suppression of production on account of erratic consumption of electricity. The assessee filed an appeal against the said order of CCE, Aurangabad before the CESTAT and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... payment of Excise duty before the Settlement Commission and in the absence of any other inquiry or investigation being carried out by the Assessing Officer or any other evidence being brought on record, the Tribunal held that no addition is warranted in the hands of the assessee. The issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. Was summarized under para 9, which reads as under:- "9. At this stage we are not considering the appeals filed by the Revenue for the reason that those appeals are against the finding of the Ld. CIT(A) that the entire value of alleged suppressed production/sales of Ingots and Billets cannot be treated as income of the assessee and some reasonable percentage of the gross profit is to be estimated. Ld. CIT(A), accordingly, directed the Assessing Officer to adopt gross profit @ 4% on the value of alleged suppressed production/sales and accordingly, partly sustained the additions. Now, we first decide the core issue in this case - (i) On the facts and circumstances of this case whether the Assessing Officer was justified in making the addition of Rs. 39,20,36,546/- in the A.Y. 2007-08 and Rs. 40,75,72,486/- in the A.Y. 2008 -09 on alleged su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and TMT Bars. The Assessing Officer also referred to the petition filed by the assessee before the Central Excise and Custom Settlement Commission, Mumbai Bench, Mumbai for waiver of penalty, interest and for getting immunity from a prosecution. The Assessing Officer proceeded to decide the alleged suppression of production by the assessee admittedly which was based on the information received from Central Excise Authority as well as the adjudication Order of the CCE, Aurangabad. It is pertinent to note here that in this case that there was a search and seizure action against the assessee and its group companies by the Income-tax Dept. on 17-03-2006 and in consequence of the search and seizure action u/s. 132(1) the assessments of the assessee have been framed u/s. 153A r.w.s. 143(3) for the A.Ys. 2000-01 to 2006-07. It is also pertinent to note that during the course of search and seizure operation no incriminating evidence was found suggesting that the assessee has suppressed the production as compared to the consumption of the electricity. No excess stock of finished goods was also found. We also put on record that the assessment framed by the Assessing Officer in consequence of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and TMT Bars were based in Jalna and the assessee is one of them. As per the investigation done by the Central Excise Authorities, the assessee who is manufacturing of Ingots/Billets supplied 288.500 MT. to Shri Om Rolling Mills Pvt. Ltd. which is engaged in the manufacturing of TMT Bars. The Assessing Officer also referred to a statement of Shri Surendra S. Peety, Managing Director of the assessee recorded on 12-01-2007, by the DGCEI who allegedly admitted that the goods supplied to Shri Om Rolling Mills Pvt. Ltd. i.e. Ingots/ Billets, were removed clandestinely without payment of excise duty and the said material was to extent of 275 MTs. The sale price was received in cash from Shri Om Rolling Mills Pvt. Ltd. and hence, there was no accounting. The assessee admitted the said charge of the Central Excise Authorities i.e. DGCEI and approached the Settlement Commission and paid the excise duty to the extent of Rs. 7,79,313/- for clearing the goods without payment of excise duty. The declaration filed by the assessee was accepted without any further addition or objection filed by the Central Excise Authorities. The Settlement Commission levied the penalty of Rs. 8,000/-. 16. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Value of Suppressed Production Rs. 2007-08 20,751 18,892 39,20,37,546 2008-09 29,276 21,444 40,75,72,486 18. In the A.Y. 2007 -08, the Assessing Officer gave the set off of Rs. 8,44,01,504/- which was in respect of the addition made by the Assessing Officer while completing the assessment u/s. 143(3) of the Act in the order dated 31-12-2008 and made the net addition of Rs. 30,76,35,042/-. So far as A.Y. 2008 -09 is concerned no adjustment was made in the A.Y. 2008-09 as it was the regular assessment u/s. 143(3) of the Act. Even though in the A.Y. 2008 -09, the Assessing Officer has observed that the information received from the Central Excise Authority is not relevant, but finally the assessment order is framed on the basis of the order passed by the Commissioner of Central Excise and Custom, Aurangabad as per the value determined in the adjudication order for the purpose of levy of excise duty adopting statistic of power consumption. In the computation for the A.Y. 2008-09 the Assessing Officer made the mistakes by mentioning Rs. (-) 1,91,62,000/- as per the order u/s. 143(3) when in fact the said figure is as per the return of income filed by the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he production of M.S. Ingot/Billets on the basis of consumption of 1026 units (Maximum Limit) of electricity for per MT of MS Ingots produced, it is noticed that there is a huge difference in the actual/normal production and the recorded figures in the assessee's records. The Ld. CCE accordingly, observed that the assessee has willfully suppressed the figures of production of Billets/MS Ingots in their records with an intent to evade payment of Central Excise Duty and, have involved themselves in the clandestine removal of final products. He also referred to the show cause notice issued by the DGCEI to the assessee which matter was ultimately settled by the assessee company in the Settlement Commission. The Ld. Commissioner also referred to nonmaintenance of the proper electricity consumption record more particularly in Form G-7. The Ld. Commissioner also gave the data of production from April, 2003 to March, 2008 in his order. He has also recorded the objections of the assessee company. It appears that the assesse demanded the cross examination of Dr. N.K. Batra, Professor of IIT, Kanpur which opinion was heavily relied on by the CCE, Aurangabad. The Ld. Commissioner observed that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e constituted by the Ministry of Steel, Government of India; (iii). 1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 to 820 units/MT as per Article of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 1000 to 1800 units per Ton or even higher, as per Letters dated 18.3.2008 and 25.4.2008 of same Mr. R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making [thus not for Induction Furnace], (vi). 620 to 690 units/MT as per Letter dated 22,6.2008 from Electrotherm, (vii). Letter dated 9.8.2008 of Electrotherm to a client suggesting reasons which lead to high power- consumption, and another Letter dated 5.4.2008 of Electrotherm agreeing-., with .the views of Induction Furnace "Association and informing that it is very difficult to define any range of power consumption. 20.2 As against this, in para 20 of the Order, the Tribunal in R.A. Casting (supra) considered different electricity consumption figures for production of 1 MT of MS Ingots, reported in following different reports- (i). 555 to 1046 (KW....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erials and final products; (iv). Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v). Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal, 20.5 However, since no such evidences were brought on record, the Appeal of R.A. Casting was allowed for want of evidence relating to the above points, with further finding that the Revenue, not having conducted any experiment whatsoever, cannot be permitted to justify the demands .raised. Similar is the fact situation in the instant appeals, 20.6 The evidence as per Revenue in the instant appeals are a). High electricity consumption without any explanation, b). Sale of Ingots at loss, which was economically and commercially not possible, c). Discrepancies in financial accounts in some cases and/or any proceedings under Income Tax, d). Claim of higher Auxiliary load, e). Past case settl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rance to sustain, the demand, It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in GuIabchand Silk Mills Pvt. Ltd., V/s. CCE, Hyderabad-II, 2005 (184) ELT 263, however the same was also considered in R.A. Casting (supra). It has been contention of the department that the Department is not required to prove its case to its mathematical precision, by relying on judgment of the Hon'ble Supreme Court in the case of D. Bhoormull - 1983 (13) ELT 1546 (SC), relied upon by the Commissioner as well as the Hon'ble Member (Technical). It is seen that even this judgment was considered in R.A. Casting (supra), 21. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions, Regarding the claim of the Revenue that su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under Statutes other than Central Excise Act, do not any manner help in sustaining the findings recorded in the impugned Order. In none of these cases any theoretical repot was relied for arriving at deemed production. 24. Further, in Sarvana Alloys Steels Pvt Ltd, 2011- (274) ELT 248 (Tri-Bang.) similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments in D. Bhoormull (supar), Gulabchand Silk Mills (supra), as also Hans Casting (supra). In A.K. Alloys, 2012 (275) E.L.T. 232 (Tri. - Del.) the Tribunal followed the decision of R.A. Casting (supra) and allowed the appeal, as the demand was based mainly on the evidence of power consumption without any evidence of clandestine removal. 25. I therefore concur with the findings of the Hon'ble Vice President and in my opinion, the judgment in R.A. Casting (supra) would be squarely applicable in the facts of the instant case in all the appeals. 19.4 The common order was passed by the CESTAT on 30 -07-2006 as per the majority opinion allowing the appeals filed by the assessee and other appellant companies. The copy of the majority order is placed at Page Nos. 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Settlement Commission when on the basis of investigation made by the DGCEI against some of the brokers and sub-brokers dealing in the Ingots/Billets and TMT Bars show cause notice was issued to the assessee company and matter was settled. Ld. CCE, Aurangabad in his order has taken in to consideration said matter while determining the value of the alleged suppressed production and has observed as under: "19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance that assessee had approached the Settlement Commission, admitted the evasion offence of an identical nature and had obtained immunity from criminal proceedings. The assessee has however argued that each case has to be treated as a separate case based on its own merit and dealt with accordingly. The argument of the assessee is accepted. No reliance has been placed on evidence relied upon in central excise proceedings. The findings in this case are based only on material and evidence that have been brought on record in the instant case." 61. The Tribunal thereafter, noted another aspect of the issue that no independent investigation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was subject matter before the CESTAT and said order has been set aside. Hence, we do not consider it necessary to deal with decisions relied on by Ld. Spl AR of the Revenue which are in context of admission of the Director of the assessee in the course of investigation made by DGCEI more particularly under the Indian Evidence Act as those decisions are not relevant now though good for academic discussion. So far as maintaining of Form G-7 in respect of the electricity consumption, the said issue was also before the CESTAT while deciding the fate of order of the Ld. CCE, Aurangabad. Ld. AR vehemently argued to point out how the order of the CESTAT, Mumbai Bench, Mumbai is not correct. The CESTAT is a higher appellate forum under the Custom Act 1962 and Central Excise Act 1944 and we cannot sit as revisionary authority or make any observation whether that order is right or wrong. 63. The Tribunal held that CESTAT was an appellate forum under the Customs Act, 1962 and Central Excise Act, 1954 and the Tribunal (Income - tax) could not act as revisionary authority or make any observation whether that order was right or wrong. 64. The Tribunal further referred to search and seizure op....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly taken the lowest electricity consumption for a month in a whole year and accordingly worked out the total production as per his formula and on the basis of the formula he worked out the alleged concealed income. There are certain important observations and findings of the Tribunal which are as under: 31. In the present case, the search was initiated on 17th March, 2006 in the residential and business premises of SRJ Peety Group, Jalna covering the premises of the assessee company as well. Prior to the search, the returns of income for the asst. yrs. 2000-01 to 2005-06 had already been filed under s. 139(1) of the Act accompanied by all requisite documents and proceeding under s. 143(1) of the Act stood completed. During the course of search no incriminating materials were found relating to aforesaid years which could have been added back in the proceedings under s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was very well placed before the authorities below in the director's report of each year. The same has not been disputed by the Revenue. The tax audit report also contained the unit production of eac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an be properly deduced from the method employed? (c) Whether the accounts maintained are correct and complete? 35. Without prejudice to above, we find that having rejected the books of accounts of the assessee company for all the years under consideration, the AO devised a statistical formula on the basis of electricity consumption that was applied uniformly in order to work out certain production and resultant concealed income for each year under consideration. The AO could not substitute the same by cogent reasoning. He has simply taken the lowest electricity consumption for a month in the whole year and treated the production in that month as the correct production and then proceeded to arrive at his production figure by multiplying the production in the books by the ratio of production to the electricity consumption for the month in which electricity consumption was minimum. The method of computing the so-called suppressed production is not justified in absence of sound basis for same. 36. The consumption of the electricity for the manufacture of mild steel ingots/billets depends on various factors like quality of raw material which is the major input, voltage of the supp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... already been filed u/s. 139(1) of the Act, accompanies by all requisite documents and proceedings. The scrutiny was thus completed. During the course of search, no incriminating material was found relating to the said years, which could have been added in the proceedings u/s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was placed before the Authorities in the Director's Report of each year. The same has not been disputed by the Revenue. The Tax Audit Report also contains the unit production of each year, which was accepted year after year along with returns and no query was raised by the Revenue. The finding of fact dated 31/03/2008 in the order passed by the Income Tax Appellate Tribunal refers to a detailed chart. The matter of fluctuating electricity, therefore, was held to be one, and since details were made available to the Department, which could have been raised during the course of regular assessment and not u/s. 153A of the Act. The finding is that nothing incriminating was found in the course of search relating to these assessment years. The additions, therefore, were not corresponding to the seiz....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of ACIT Vs. A.K. Alloys (P) Ltd. (supra) in which the additions were made by the A.O. for alleged suppression of production and investment in purchase of raw material relying on information received from Central Excise (Ludhiana) and when matter reached before the Tribunal and it is held as under: 10. The assessee had filed an appeal against the order of CIT Customs & Excise, before the Customs, Excise & Service Tax Appellate Tribunal with principal Bench at New Delhi (supra). The copy of the order of the Customs, Excise & Service Tax Appellate Tribunal is placed on record by the learned A.R. for the assessee. The Customs, Excise & Service Tax Appellate Tribunal after considering the factual aspects of the case, the quantum of production, the consumption of electricity observed that there is nothing on record to show that high power connection supported by evidence was made on a particular date and that resulted in higher amount of production. It was further observed by the Customs, Excise & Service Tax Appellate Tribunal vide para 4.2 that So far as the production quantum is concerned, there is also no evidence on record to show that the authorities intervened lawfully recordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n account of unexplained investment merits to be made in the hands of the assessee. We are also in agreement with the observations of CIT (Appeals) in deleting the aforesaid addition as no independent evidence has been brought on record to establish that the assessee had, a) suppressed its production and; b) it made sale of its unaccounted production, outside the books of account. Upholding the order of the CIT (Appeals) we dismiss the ground Nos.1 and 2 raised by the Revenue." 26. In the case of ACIT Vs. Arora Alloys Ltd. (supra) the addition was made on the basis of electricity consumption to produce 1 MT of Ingots. The confessional statement was also given by the Managing Director of the said company before the Central Excise Authorities. The Ld. CIT(A) allowed the assessee's appeal. The Revenue challenged the order of Ld. CIT(A) before the Tribunal. It was held that there was no justification to support the said addition and the Revenue's appeal was dismissed. In the light of our above discussion, we are of the opinion that the additions made by the Assessing Officer and confirmed by Ld. CIT(A) in both the assessment years based on the order passed by the CCE, Aurangabad as w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... turnover of the half period of the earlier year under appeal. The Ld. CIT(A) has observed that the undisclosed sale for the earliest year under appeal are of Rs. 39,20,36,546/- and the said investment required for production out of books, therefore, worked out Rs. 37,69,582/-. In fact, the said addition is made by the Ld. CIT(A) as he has confirmed the alleged suppression of production/sales as held by the Assessing Officer. As the assessee has succeeded in getting the relief by deleting the entire additions towards alleged suppression of production and sales, hence, this addition does not survive and said addition is also deleted. We, accordingly, allow the Ground No. 10 taken by the assessee." 67. The Tribunal also dismissed the appeal of the Revenue against the estimation of gross profit by the CIT(A) observing as under:- "31. We have heard the parties. The main grievance of the Revenue is against the estimation of GP by Ld. CIT(A). We have already allowed the grounds taken by the assessee on the alleged suppression of the production/sales. As the assessee has succeeded on the basic additions, the grounds taken by the Revenue do not survive as the entire additions are delete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id decision is applicable to the facts of the present case. 70. Another objection raised by the Ld. Special AR before us during the course of hearing of the bunch of appeals was that it had moved Miscellaneous Application against the order of Tribunal dated 16.01.2015 and the hearing of the present appeals be kept in abeyance. After hearing the appeals in the present bunch of appeals, the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) was also fixed for hearing and the same was heard on 19.06.2015. We have by an order of even date dismissed the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) after considering the submissions of both the Authorized Representatives. We have by an order of even date held that there is no merit in the said Miscellaneous Application filed by the Revenue and no remedy is available to the Revenue under section 254(2) of the Act. In view thereof, the next objection of the Ld. Special AR for not relying on the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra) also stands dismissed. 71. Further, the Tribunal in the case of another Rolling Mills i.e. Mahaveer Steel Re-Rollin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... penalty of Rs. 9,000/-. The assessee before the Assessing Officer admitted that the additional income in respect of the said clandestine removal of material without payment of Excise duty, is to be added in the hands of the assessee. All this information was available before the Assessing Officer during the course of assessment proceedings, but no other investigation or inquiry was made by the Assessing Officer while completing the assessment in the hands of the assessee. The Assessing Officer on the other hand, was of the view that the assessee had not correctly disclosed the production of TMT Bars. The basis for such assumption was the electricity consumption, for which the Assessing Officer placed reliance on the results of electricity consumption under US standards against which, handicap of 25% was given. The Assessing Officer applying the formula worked out the suppressed production and sales in the hands of the assessee. We in the paras hereinabove have already adjudicated the issue that no addition on account of suppressed production / sales on account of such formula could be made in the hands of the assessee. The Ld. Special AR on the other hand, stressed that where the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....can be made in the hands of the assessee on account of alleged clandestine removal of material without payment of Excise duty or suppressed sales for the balance period, in the absence of any evidence found against the assessee for the balance period. 74. Another aspect of the issue is that though the factum of the assessee filing the petition before the Settlement Commission, was before the Assessing Officer, even additional income on such offer of settlement was offered by the assessee before the Assessing Officer, however, no further inquiry, investigation or action was taken by Assessing Officer in this regard. In the absence of the same, the issue raised in the present appeal is whether any extrapolation of sales for the balance year on the basis of evidence found for the part of the year is justified or not. The answer, in our opinion, has to be in negative. 75. The Ld. Special AR vehemently relied on the ratio laid down by the Tribunal in assessee's own case reported in 137 TTJ (Pune) 627, which in turn has been approved by the Hon'ble Bombay High Court. It may be pointed out that the facts of the case before the Tribunal in assessment year 2006-07 are at variance. The add....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In the facts of the said case, certain documents were found by the Income-tax Department pursuant to search and seizure action, which indicated clearance in sales, on the basis of which the additional income was added in the hands of the assessee. The said information was forwarded to the Central Excise Department pursuant to which, order levying additional Excise duty was passed by the Excise Commissioner. However, the Tribunal cancelled the Excise demand on the ground that there was no corroborative evidence of clandestine removal of material without payment of Excise duty was found from the possession of the assessee by the Excise authorities. 77. Following the same analogy of reasoning, where the evidence of clandestine removal of material without payment of Excise duty has been found by the Excise Department, in respect of sale of goods for a particular quantity and for a particular period, the same could not be relied upon as evidence, while extrapolating the sales and the additional income thereon in the hands of the assessee during the Income-tax proceedings. The Assessing Officer does not have any evidence for suppressed production and even after the order of Settlement ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....surrendered vide the said settlement and no inference could be drawn against the assessee for extrapolating the same for full year and for the balance year and in other years, other than the year in which the said settlement was offered. In this regard, we find support from the ratio laid down by the Bangalore Bench of Tribunal in Anjaneya Brick Works vs. CIT (supra), wherein it has been held that mere existence of evidence of concealment in the next assessment year could not be the basis for estimating income in any other assessment years. 82. Further, before the Hon'ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra), the issue was in relation to the evidence found of unaccounted sales for part of the period during the course of search. The Assessing Officer on the said basis assumed unaccounted sales during the entire year, which was deleted by the CIT(A) and the Tribunal. The Hon'ble Delhi High Court observed that assumption of Assessing Officer may have perhaps been valid if the search had been conducted after the accounting year and the books of account had brought some discrepancy. 83. Similar proposition has been laid down by the Hon'ble Bombay High Court in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Miscellaneous Application. However, in the interest of justice, the said issue of extrapolation of suppressed sales was adjudicated by the Tribunal by observing as under:- "41. Before closing the issue, in the interest of justice, we would like to adjudicate the issue of extrapolation of suppressed sales on account of settlement petition made by the assessee. Admittedly, during the course of search and seizure operation on certain brokers, evidences of clandestine removal of material without payment of Excise duty, was found against the assessee. However, no search and seizure operation was carried out against the assessee, but the assessee claims that in order to buy peace of mind, it had declared the said amount by way of petition before the Settlement Commission. The said offer made by the assessee was accepted in toto. It may be noted that the Excise authorities have the power to re-visit the offer made by the assessee, in case, any adverse material is available against the person making the offer. It may also be noted that the Settlement accepted in the hands of the assessee is for the financial year and is not restricted to the number of days for which it has offered. In ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8 only and no such petition for clandestine removal of material without payment of Excise duty has been made for assessment year 2008-09. The assessee had offered the additional income on account of such clandestine removal of goods before the Assessing Officer for assessment year 2007-08 and the same was the reason for reopening the assessment under section 148 of the Act. Once a particular fact was available with the Assessing Officer, which was taken note of and considered by him during the assessment proceedings, but the addition having been made on only on the issue of erratic consumption of electricity, which is the basis of order passed by CCE, Aurangabad, who was also in knowledge of the clandestine removal of material and the investigation carried out by the DGCEI and the petition before the Settlement Commission, even the Third Member of CESTAT was aware of all these proceedings, but since the settlement petition filed by the assessee had been accepted in toto by the Settlement Commission, no further addition could be made in the hands of the assessee on this ground, in the absence of any inquiry or investigation by the Assessing Officer. Accordingly, the reliance placed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lude the additional income on account of such admitted clandestine removal of material without payment of Excise duty, by the assessee either before the Settlement Commission or before the Excise authorities, in the hands of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the Assessing Officer and where the Assessing Officer has failed to collect additional evidence, no addition can be made in the hands of the assessee, by way of extrapolation of sales for 300 days on account of any evidence found in any preceding or succeeding years. Further, no addition can be made in the hands of the assessee, where no petition has been filed by the assessee before the Settlement Commission in any of the respective years or before the Excise authorities. 89. Since we have deleted the addition in the hands of assessee on both accounts i.e. addition made on account of erratic consumption of electricity and addition proposed on the basis of evidence found for the part of the year of clandestine remova....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Excise authorities, before the Assessing Officer in order to compute the additional income in the hands of assessee in the respective years. 20. The Assessing Officer while completing assessment in the hands of the assessee had not relied on the ratio laid down by the Tribunal in the case of SRJ Peety Steel Pvt. Ltd. and Shri Om Rolling Pvt. Ltd. (supra) on the ground that the appeal filed by the Department is pending before the Hon'ble Bombay High Court. The learned Authorized Representative for the assessee furnished on record the copy of order of Hon'ble Bombay High Court in the case of CIT Vs. SRJ Peety Steel Pvt. Ltd. and CIT Vs. Shri Om Rolling Pvt. Ltd. vide Tax Appeal No.30 of 2011 & Ors., wherein the findings of the Tribunal have been upheld vide judgment dated 10.02.2014. 21. Hence, the addition made in the hands of assessee by the Assessing Officer on the plea that the Departmental appeal is pending before the Hon'ble Bombay High Court does not survive. 22. Another aspect to be noted in the present bunch of appeals is that the directors of the assessee company and their family members had offered additional income of Rs. 14 crores, which has been declared in the re....