TaxTMI 
TaxTMI 
2015 (10) TMI 2316
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Revenue have filed Cross appeals against the consolidated order of CIT(A), Aurangabad dated 30.12.2011 relating to assessment years 2006-07 to 2008-09 against the order passed under section 143(3) r.w.s. 147 and 143(3) of the Income-tax Act, 1961 respectively. Further, the assessee M/s. Shivshakti Re-Rolling Mills Pvt. Ltd. and the Revenue have filed Cross appeals against the consolidated order of CIT(A), Aurangabad dated 04.01.2012 relating to assessment years 2006-07 to 2007-08 against the order passed under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 respectively. 2. This bunch of appeals relating to different assessees on similar issues were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issues in ITA No.125/PN/2012 and ITA No.430/PN/2012 to adjudicate the issues. 3. Reference is also made to facts in ITA Nos.211 to 213/PN/2012 and ITA Nos.432 to 434/PN/2012 for adjudicating the issue. 4. In ITA No.125/PN/2012, the assessee has raised the following common grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the re-o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner of Income Tax (Appeals) further erred in not following the order of the Hon. Income Tax Appellate Tribunal in the case of appellant company for assessment years 2000- 01 to 2006-07 reported in 137 TTJ (Pune) 627, wherein the similar addition was deleted. 12. The appellant company craves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing. 5. In ITA No.430/PN/2012, the Revenue has raised the following common grounds of appeal:- 1. Whether on the facts and in the circumstances of the case the CIT(A) was justified in quantifying the suppressed production @ 4% even after accepting the fact that the assessee indulged in clandestine removal of goods without payment of taxes. 2. On the facts and in the circumstances of the case whether the CIT(A) was justified in not appreciating the fact that manufacturing and administrative expenses on the unaccounted production worked out in the appellate order had already been borne by the production shown in the books of accounts? 3. The order of the AO be restored and that of the CIT(A) be vacated. 4. The appellant craves leave to add, amend or alter any grounds o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Pvt. Ltd. and MITC Rolling Mills Pvt. Ltd., manufacturers of Thermo Mechanically Twisted (TMT) bars. We find that similar action of DGCEI was referred to by the Tribunal in the related case of the assessee i.e. in M/s. SRJ Peety Steels Pvt. Ltd. Vs. the Additional CIT in ITA Nos.123 & 124/PN/2012 and in Cross appeals filed by the Revenue in ITA Nos.435 & 436/PN/2012 relating to assessment years 2007-08 and 2008-09 and vide order dated 16.01.2015, the factual aspects of the intelligence report of the DGCEI have been referred to by the Tribunal, which are the basis for carrying on the investigation in the hands of the assessee before us. In view of identical intelligence report being relied upon as in the case of sister concern, for the sake of brevity, we refer to the factual aspects of the case as noted by the Tribunal, which read as under:- "4.1 The Assessing Officer has observed that intelligence was gathered by the DGCEI, Zonal Unit, Mumbai, in the case of Shri Salasar Ispat (Pvt.) Limited and MITC Rolling Mills (Pvt.) Ltd., manufacturers of Thermo Mechanically Twisted (TMT) Bars, that they were involved in clandestine clearance of finished products through a broker, Shri Um....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessing Officer has given the names of the parties in Para No. 2.7 of the assessment order against whom the investigation was carried out by the Central Excise Authorities and the name of the assessee appears at Sl. No. 10 who had allegedly supplied Ingots/Billets to its sister concern Shri Om Rolling Mills Pvt. Ltd. to the extent of 288.500 MT. 4.3 On the basis of the investigation made by the Directorate General of Central Excise Intelligence (in short the "DGCEI") by initiating Searches against some brokers and sub-brokers the Central Excise Department issued Show Cause Notices to the assessee and other manufactures whose names were revealed during investigation for evasion of excise duty. The assessee admitted to clandestine removal of finished products to extent of 288.50 MT without payment of excise duty. The Assessing Officer has observed that the assessee had made a petition before the Central Excise and Customs Settlement Commission ( herein after referred to as the Settlement Commission) for waiver of penalty, interest and immunity from the prosecution. The said petition was admitted and disposed off by the Settlement Commission. As noted by the Assessing Officer th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ills at Jalna use 'Thermex' Quenching technology which is the latest technology in offer in India. Since the ingots and billets used in production conform to the standards for producing Fe-415, Fe-500 and Fe-550 grade of TMT as per Indian Standards issued by the BIS, there is no reason to suspect that the inherent qualities of the billets and ingots used will not be according to standard specification. The Assessing Officer thus, after allowing an allowance of 25% over and above the US cost observed that the range of electricity consumption would be in the range of 169 KWh/MT to 206 KWh/MT i.e. average of 188KWh/MT. The Assessing Officer noted the consumption of various manufacturers in Jalna cluster during the previous years relevant to assessment years 2006-07 to 2008-09 and was of the view that the average rate of electricity consumption according to international standards after giving handicap of 25% was 188KWh/MT and the average minimum consumption in the peer group during the three years was 191 KWh/MT. Therefore, he adopted the electricity consumption in steel bar rolling mill at 188KWh/MT or the consumption of the assessee, if lower. As per the Assessing Officer, the adopt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant. (4) The A.O. has also pointed out that there is substantial variation in various months and in respect of various manufacturers of TMT bars in electricity consumption required for the quantum of goods produced, which is abnormal. (5) The decision in the case of ACIT Vs, SRJ Peety Steels Pvt.Ltd. / Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune) has been relied on by the appellant. The facts before the Hon'ble ITAT while deciding the said cases were different to some extent. In the said cases, clandestine removal of goods by the appellant and the admission of the appellant about the said fact of unaccounted transactions was not before the Hon'ble ITAT. Further, the detailed order of the Commissioner of Excise and the other facts brought on record by the A.O. in the assessment order was not before the Hon'ble ITAT, Pune while deciding the above referred cases. Further in the said cases action u/s 132 was conducted and the appellant was assessed u/s 153A of the Act and hence addition in respect of completed assessments in such cases could be made only on the basis of material found in search action. In view.of the above facts, the reliance place....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ever, no addition was made in the hands of the assessee because of the addition on account of estimated GP rate in the preceding year i.e. assessment year 2006-07. The CIT(A) upheld the rejection of books of account under section 145 of the Act. 14. Both the assessee and the Revenue are in appeal against the aforesaid order of CIT(A). 15. The learned Authorized Representative for the assessee at the outset said that the grounds of appeal No.1, 2 and 10 were not pressed in assessment year 2007-08, which were against the reopening of assessment under section 147 of the Act and non-issue of notice under section 143(2) of the Act, after reopening the assessment under section 147 of the Act. The learned Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeals of the assessee and the Revenue are covered by the order of Tribunal in the case of sister concern i.e. SRJ Peety Steels Pvt. Ltd. (supra) and Cross appeals filed by the Revenue (supra). In assessment year 2008-09, the assessment was completed under section 143(3) of the Act and there were no issues with regard to reopening of the assessment. In respect of the addition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es by the assessee. Our attention was drawn to the written submissions filed by the assessee dated 13.12.2010 before the Assessing Officer, in which the assessee had offered an income of Rs. 1,08,920/- being GP @ 2% on suppressed sales of Rs. 54,45,755/-. The Ld. special AR pointed out that where the assessee had admitted suppression of sales before the Assessing Officer, this being important finding of the fact, which had remained unchallenged, in the absence of any retraction of the said confession, it was an important piece of evidence against the assessee. Therefore, the contention of the assessee that the Assessing Officer had merely relied upon the statement given before the Central Excise authorities was mis-leading and factually incorrect, where evidence of clandestine removal and suppression of income is found for part of the year, then the Assessing Officer can estimate the additional income for whole of the year. For this, the methodology of suppression can be looked into, was the plea of the Ld. special AR. It was fairly admitted by him that the Excise authority had added in the hands of the assessee only to the extent of evidence found. He further pleaded that since....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessing Officer has simply relied upon the hypothetical calculations of production merely on the basis of consumption of electricity. He referred to the assessment order and submits that in Para No. 3.1 the Assessing Officer has observed that the confessional statement of Shri Surendra S. Petty, dated 12-01- 2007 who is the Managing Director of the assessee company, before the DGCEI on clandestine removal goods and sale of 285 MT of ingots to Shree Om Rolling Mills without payment of excise duty and he also admitted that the said sales were made against cash. During the assessment proceedings, in their joint written submissions dated 13-12-2010 filed before the Assessing Officer by the assessee company and Shree Om Rolling Mills Pvt. Ltd. the assessee company offered income of Rs. 6,72,620/- i.e. G.P. @ 3% on suppressed Sales of Rs. 47,75,600/- + Rs. 5,29,350/- towards peak purchases. He submits that Shree OM Rolling Mills Pvt. Ltd. which is a sister concern of the assessee Company, offered Profit of Rs. 1,08,920/- on the impugned suppressed sales. He argues that the assessee itself has admitted the fact of clandestine removal of goods and sale of the same before the Assessing O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore no adverse inference can be drawn against them. In an application filed before the Settlement Commission it is mentioned that the assessee admits the duty liability. He submits that there is no question of suo moto admitting clandestine removal of goods without payment of excise duty by the assessee company before the Excise Authorities but there was conclusive evidence against them as per the investigation made by the DGCEI. He placed his reliance on the decision of the Hon'ble Supreme Court in the case of Mak Data P. Ltd. Vs. CIT 358 ITR 593 (SC). He submits that the proceedings before the Settlement Commission as well as the confession by the assessee are the good pieces of evidence which are also basis for arriving at the conclusion that the assessee was indulged into clandestine removal of the goods without payment of the excise duty and suppression of the sales. He submits that it is well settled law that if suppression for part of the period is found then suppression can be estimated for the rest of the year. Presumption u/s. 114 of the Indian Evidence Act can be relied upon in estimating the suppressed income. On this proposition he relied on the following decisions....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... argument he relied on the following precedents: i. Sumati Dayal Vs. CIT 214 ITR 801 (SC). ii. Collector of Customs Madras and others Vs. D. Bhoormull 2002- TIOL-253-SC-CUS. 11.3 He argues that on the doctrine of preponderance of probability the action of the Assessing Officer to estimate suppression of the sales on the basis of the electricity consumption has to be upheld. 11.4 Ld. Spl. AR submits that the assessee company has vehemently argued that in the case of R.A. Castings Pvt. Ltd. 237 E.L.T. 674 (Tri. - Del.) it is held that the suppressed production worked out solely on consumption of electricity cannot be sustained. It was further argued that the aforesaid decision of the CESTAT was affirmed by the Hon'ble Allahabad High Court and SLP filed by the Revenue to the Supreme Court was dismissed. He argues that the said decision is not helpful to the assessee for the following reasons: i. In the said decision there was not even an iota of evidence showing the suppression of production by the said companies and the suppression was estimated merely on the basis of electricity consumption relying on the report of Late Dr. N.K. Batra, Professor of IIT, Kanpur whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e decision of CESTAT does not have any binding force on ITAT which is constituted under the Income Tax Act. Both the tribunals are constituted under different enactments and discharge their functions independently under respective enactment. However, the decision of one Tribunal may have persuasive value for other Tribunal in certain cases where issues are identical. 11.6 Ld. Spl. AR for the Revenue vehemently argues that the Hon'ble Third Member of the CESTAT has not considered the evidence about the clandestine removal of goods and the duty paid on the same which matter was settled before the Settlement Commission. Ld. Spl. AR for the Revenue vehemently argues that it is crystal clear that the Hon'ble Third Member of the CESTAT had proceeded only to decide whether the evidence of higher electricity consumption proves suppression of production. There is no justification to rely on the decision in the case of R.A. Castings (supra). He argues that there is conclusive evidence against the assessee by way of admission and the petition filed by the assessee before the Settlement Commission and hence, these evidences cannot be discarded. Ld. Spl. AR for the Revenue further su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, assessments were completed under section 143(3) r.w.s. 148 of the Act by the Assessing Officer on account of clandestine removal of goods and erratic consumption of electricity, as evidenced by books of account estimated quantum of production and sales. He further pleaded that whenever clandestine removal of material was found, suppressed turnover could be estimated on account of erratic consumption of electricity. Referring to the order of Tribunal in the case of SRJ Peety Steels Pvt. Ltd. (supra) relating to assessment year 2006-07, it was pointed out that the Tribunal vide decision reported in 137 TTJ 627 (Pune) has held that no addition is warranted in the assessment years prior to search under section 153A of the Act. However, in respect of the search year, addition only of the undisclosed income was made in the hands of the assessee. 20. The proceedings in the case continued up to lunch hour and thereafter, both the parties agreed to the hearing post lunch hour. However, the Ld. special AR furnished a letter under his signature stating that the Principal CIT, Aurangabad was contemplating to file certain petitions before the President / Vice President, ITAT and therefor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ensued in the process with the Excise Department". The company was always aware that carrying on litigation is not in the best interest of the company. The learned Authorized Representative for the assessee further submitted that the additional income was offered on the basis of rough sheets found from the brokers and on the basis of which, the assessee made a petition to the Settlement Commission for removal of goods for 288.50 MT and paid Excise duty, interest and token penalty. Further contention of the learned Authorized Representative for the assessee by way of written submissions is that the Assessing Officer does not have any evidence for suppressed production and even after this letter and settlement petition, the Assessing Officer has not investigated or brought any material on record proving the suppressed production and its sale out of books. The learned Authorized Representative for the assessee strongly objected to the objections of the Ld. special AR that no reliance should be placed on the order of Tribunal in SRJ Peety Steels Pvt. Ltd. (supra) and on the plea that Miscellaneous Application under section 254(2) of the Act has been filed against the said order. It was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al. Further, the CESTAT in the case of M/s. SRJ Peety Steels Pvt. Ltd. in para 19 had observed that this aspect was already considered by CCE, which is at para 19 of his order. He further submitted that where the Assessing Officer has no material in his hands regarding suppressed production and its sale and he had merely relied on the order of Settlement Commission as mentioned in para 4, there was no merit in any such addition. The learned Authorized Representative for the assessee then drew distinction on the reliance placed upon by the Ld. special AR on various decisions, which have been considered by the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra). Further, the learned Authorized Representative for the assessee placed heavy reliance on the ratio laid down by Hon'ble Bombay High Court in CIT Vs. C.J. Shah and Co. (2000) 246 ITR 671 (Bom) for the proposition that where the loose sheets indicated undisclosed sales for three months, the addition could not be made for the entire block period on the basis of loose sheets. Further, reliance was placed on the ratio laid down by the Hon'ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (2007) 294 ITR 497 (Delhi), where pu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, transportation, etc., which in turn have been dealt in by the Third Member in the case of M/s. SRJ Peety Steels Pvt. Ltd. and in the absence of any surrounding circumstances available, the rule of human probability could not be applied. Further, the decisions relied upon by the Ld. special AR have been considered by the Third Member of CESTAT and Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. and the addition made in the hands of assessee has been deleted and hence, there is no merit in the reliance placed upon by the Ld. special AR. 26. Coming to the objections of the Ld. special AR whether the ratio of Hon'ble CESTAT in the case of R.A. Castings Pvt. Ltd. (supra) is applicable to the present case, the learned Authorized Representative for the assessee at the outset submitted that this was the case of Rolling mills, where there is no order of Commissioner of Central Excise and CESTAT and hence, the said proposition is not to be applied. It was pointed out by the learned Authorized Representative for the assessee that other than the quantity which was offered by the assessee before the Settlement Commission and as well as offered as income to tax i.e. GP on the same, there was n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....basis of electricity consumption. The learned Authorized Representative for the assessee relied on the decision of M/s. SRJ Peety Steels Pvt. Ltd. (supra) and on series of other decisions which have been considered by the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra). Regarding rejection of books of account, merely on the basis of higher consumption of electricity, it was pointed out by the learned Authorized Representative for the assessee that the same was not justified as the Assessing Officer has not recorded the satisfaction against the correctness or completeness of the books of account of the assessee or whether the method of accounting has not been regularly followed by the assessee. In the absence of defects having been pointed out by both the Assessing Officer and CIT(A) in the books of account, except electricity consumption, there was no merit in the rejection of books of account. Reliance was placed on series of decisions in this regard. 28. The learned Authorized Representative for the assessee further pointed out that the Hon'ble Bombay High Court in assessee's own case relating to assessment year 2006-07 had dismissed the appeal of the Revenue against the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tage of appellate proceedings before the Id. C.I.T. (Appeals). 3. The learned Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppression of sales of Rs. 35,47,80,518/-. 4. 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. 5. 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. 6. 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 firm 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. 7. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in making an addition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd 9 are not pressed. 33. The Ld. Authorized Representative for the assessee further submitted a synopsis of his arguments and a note on non adoption of suppressed sales for part of the period for extrapolating for the full year and other years. The Ld. Departmental Representative for the Revenue furnished written arguments and also additional submissions about non-applicability of decision of the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra). The contention of the assessee before us was that the facts of the present case are similar to the facts as in Shree Om Rolling Mills and even the assessment order passed by the Assessing Officer was on the same line as passed in Shree Om Rolling Mills. The Ld. Authorized Representative for the assessee further submitted that assessee had filed settlement petition before the Settlement Commission in assessment years 2006-07 and 2007-08. The Ld. Authorized Representative for the assessee thereafter took us through the order of the Assessing Officer wherein he had quantified the consumption of electricity on US standard and by adopting the average sale price and average cost of raw material worked out the book profits and consequent excess p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttlement Commission and admitted evasion of offence of an identical nature. The Third Member of CESTAT at page 13 of his order had considered the aspect of proceedings, which were settled by accepting the argument, that each has to be treated as a separate case based on its own merits and also referred to para 19 of the order of the Excise Commissioner. It was further pointed out by the Ld. Authorized Representative for the assessee that the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra) had considered the findings of CCE and CESTAT in para 20.1 of the order and decided the issue and the said parity of reasoning is squarely applicable to the facts of the present case. 35. The Ld. Authorized Representative for the assessee further submitted that where the assessee had filed a settlement petition for a particular quantity only before the Excise Settlement Commission and where the Department has not produced any evidence in respect of more quantity of suppressed sales than the quantity declared by the assessee and where the Settlement Commission had not rejected the petition of the assessee nor had come up for settlement of more quantity of goods than the declared, there was no ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal." 36. The Ld. Authorized Representative for the assessee further pointed out that the addition if any in the hands of the assessee should be made on the basis material found in the possession of the assessee and/or any inquiry or investigation carried out by the Income Tax Department and in the absence of the same, there is no merit in any extrapolation of income in the hands of the assessee. Reliance in this regard was placed upon the ratio laid down in the following decisions :- (i) Chhattisgarh Steel Casting (P) Ltd. vs. ACIT, 8 DTR (Bilaspur) 14; (ii) Anjaneya Brick Works vs. CIT, 74 TTJ 921 (Bangalore-ITAT); (iii) C.J. Shah & Co., 246 ITR 671 (Bom.); and, (iv) Anand Kumar Deepak Kumar, 294 ITR 497 (Delhi). 37. The Ld. Authorized Representative for the assessee stressed that once the decisions for a particular issue are available under the Income Tax Act, there is no merit in relying on any decision under any other Act. The Ld. Authorized Representative for the assessee further pointed out that while arguing the case of Shree Om Rolling Mills, the Ld. Departmenta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Excise Department were not able to find any corroborative evidence of clandestine manufacture of goods and therefore it cannot be said that there was clandestine removal of goods. The copy of the said decision reported in 2011 (266) E.L.T. 399 (Tri.-Bang.) was filed on record. It was contention of the Ld. Authorized Representative for the assessee that on same analogy the evidence found by the Excise Department in respect of sale of goods for a particular quantity for a particular period could not be relied upon as evidence in the Income Tax Department. The Ld. Authorized Representative for the assessee concluded by stating that the issue in the present case is to be decided on the basis of findings of Assessing Officer and then the CIT(A) and the Tribunal cannot travel beyond and while passing the order the Tribunal cannot proceed on any other basis. 39. The Ld. Special AR, in reply, stated that the submissions filed in Shree Om Rolling Mills be treated as notes filed in the present appeal also. The first point raised by the Ld. Special AR was that the decision of the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra) decided on 16.01.2015 is not to be applied as it had not consid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eel Pvt. Ltd. (supra), it was further pointed out by him in the written notes the Assessing Officer had calculated the suppression of sales on the basis consumption in electricity and if the Tribunal was of the opinion that the said method evolved by the Assessing Officer was not appropriate, then the suppression could be estimated for 300 days on the basis of suppression found for few days. 40. Replying to the submissions made by the Ld. Authorized Representative for the assessee that no iota of evidence was found by the Department in order to extrapolate the sales for whole of the years, the Ld. Special AR stated that when there is evidence before the Excise Department and even before the Income Tax Department, then such excercise could be carried out in the hands of the assessee. He stressed that it was not the case of the assessee that there was no suppression of sale. On the other hand, assessee has submitted revised computation of income on the basis of the petition filed before the Settlement Commission or the Excise Authority. In view thereof, where two evidences were available before the Assessing Officer i.e. the statement and order of the Excise Authority and the inde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t that the Third Member of CESTAT in SRJ Peety Steel Pvt. Ltd. (supra) took a view on the basis of electricity consumption but there could be other circumstances on which addition could be made in the hands of the assessee. In case, there were two reasons and where the Assessing Officer had two evidences i.e. admission before the Excise Authority and admission before the Income Tax Department on account of admission of additional income and in the absence of any plausible explanation filed before the Assessing Officer, the Assessing Officer had worked on the direct evidence on the statement of the assessee and circumstantial evidence of electricity consumption and the addition was warranted. 43. The Ld. Special AR thereafter referred to the series of decisions referred to while arguing the appeal in Shree Om Rolling Mills Pvt. Ltd.. Further, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in S. Shanmugavel Nadar vs. State of Tamil Nadu (supra), wherein there was an identical proposition addressed by the Hon'ble Apex Court. He further stressed that where all the expenses were booked in the books of account, there is no merit in estimation of GP at 4%. In c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....where the same is not declared then the same is to be added in the hands of the assessee. Further, the Ld. Authorized Representative for the assessee pointed out that the reliance of Ld. Special AR on the ratio laid down by the Hon'ble Supreme Court in S. Shanmugavel Nadar vs. State of Tamil Nadu (supra) is misplaced as same is on different facts and our attention was drawn to the pages 660 to 665 of the judgement in this regard. 45. We have heard the rival submissions of the parties and perused the record. Ld. AR for the assessee filed argument synopsis and Ld. Spl. AR for the Revenue also has filed notes of his argument which are placed on record. We have also considered all the precedents and decisions relied on by both the Parties. 46. Before addressing the issue on merits, we would like to make a mention of the proceedings before the Bench of the present cases listed before us, which were made vide order sheet entry dated 07.05.2015. The present appeals were fixed for hearing initially on 10.03.2015 and were adjourned at the request of the Special AR for the Revenue as he was not ready to argue the appeals. The reasons stated in the letter dated 10.03.2015 for seeking ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were heard. All the other appeals are adjourned to 08.05.2015 as part heard. 48. On 08.05.2015, on calling of the matters, we find that the Special AR for the Revenue is not present in the Court and there is no intimation about his absence in the bunch of matters, which are listed for hearing. The CIT-DR was present and was asked to explain his absence. In reply she stated that she had no intimation. In view of continued defiance of the Special AR in yesterday's hearing and his non-appearance in today's hearing, conduct of the Special AR is to be taken note of. The CIT-DR was informed in the Bench as to why costs should not be imposed on the Department for his continued defiance and for interrupting proceedings of the Bench. The hearing is to continue in the listed matters as annexed on 13.05.2015 as part-heard. 49. On 13.05.2015, Shri J.P. Bairagra was present for the assessee and Shri Sunil Ganoo, Ld. Special AR, Smt. M.S. Verma, CIT-DR & Shri Rajesh Damor were present for the Department. The matter was finally heard on 14.05.2015 when Shri J.P. Bairagra present for the assessee and Shri Sunil Ganoo, Ld. Special AR, Smt. M.S. Verma, CIT-DR & Shri Rajesh Damor were present ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 143(2) after recording of reasons under section 147 of the Act. However, in some cases, the assessment has been completed under section 143(3) of the Act and there are no issues against re-opening of the assessment. The Ld. Authorized Representative for the assessee in the present bunch of appeals relating to Shree Om Rolling Mills at the outset stated that the grounds of appeal Nos.1, 2 and 10 in relation to re-opening of the assessment under section 147 and non-supply of reasons for re-opening under section 147 of the Act, are not pressed. Hence the same are dismissed as not pressed. 54. The next issue is the working of the suppressed production and the application of GP rate of 4% on such suppressed production and third is the working capital required for investment in such suppressed production. We find that similar issue of addition on account suppressed production on account of erratic consumption of electricity arose before the Tribunal in the case of SRJ Peety Steel Pvt. Ltd. (supra). Though both the parties have raised their arguments in favour of/against the order of the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra), we first refer to the decision of the Tribun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he same. The Assessing Officer in the case of Rolling Mills i.e. in the hands of the assessee before us was of the view that because of erratic consumption of electricity, in turn, relying on the data of consumption of electricity as per US standards, came to the conclusion that there was suppression of production by the TMT Bars manufacturers in Jalna cluster on the ground of variance in consumption of electricity versus production. The Assessing Officer also referred to the data collected in the cases of furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd. and others and relying on the addition made in the hands of M/s. SRJ Peety Steels Pvt. Ltd. (supra), in turn, on the basis of the order of CCE, Aurangabad, made additions in the hands of present set of assesses before us. 56. The Tribunal had elaborately considered all the aspects of addition in the hands of the furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd., on the basis of erratic consumption of electricity, which in turn, was the basis for making the additions in the hands of the assessee therein by CCE, Aurangabad and vide order dated 16.01.2015 held that since the order of the CCE, Aurangabad has been overruled by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."13. We have heard the rival submissions of the parties and perused the record. Ld. AR for the assessee filed argument synopsis and Ld. Spl. AR for the Revenue also has filed notes of his argument on 05-11-2014 which are placed on record. We have also considered all the precedents and decisions relied on by both the Parties. The assessee is manufacturer of Ingots/Billets. So far as A.Y. 2007-08 is concerned the original assessment of the assessee was completed u/s. 143(3) of the Act on 31-12-2009. While completing the assessment u/s. 143(3) of the Act, in the opinion of the Assessing Officer the electricity consumption shown by the assessee was at higher side as compared to the quantum of production declared by the assessee. The Assessing Officer, therefore, made the addition on the basis of the alleged suppression of the production/sales by the assessee as in his opinion the assessee should have declared or shown more production of the Ingot/Billets. Subsequently, on the basis of the information received from the office of the CCE, Aurangabad vide their letter dated 29-03-2010 as well as adjudication order of CCE quantifying the value of alleged suppressed production and alleged e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the fact that even for the A.Ys. 2007-08 and 2008-09, no independent investigation or any enquiry is made by the Assessing Officer or any other Income Tax Authorities. In the assessment order the Assessing Officer has placed his reliance only on the information received from the Central Excise Authorities and the proceeding before the Settlement Commission of Central Excise & Custom, Mumbai. The investigation was carried out by Central Excise Authorities i.e. DGCEI, against few brokers/sub-brokers and those brokers gave the names of many companies who are in the manufacturing of Ingot/Billets and TMT Bars. As per the statement given before the Central Excise Authorities by those brokers as well as sub-brokers namely Shri Umesh Modi, Mumbai, Shri Anil D Lingade, Shri Mukesh Gupta it was admitted that they were involved in clearing the consignments from the factory on weighment slips only and no excise duty was paid and they were involved in providing fake trading bills and challans which accompanied the vehicles carrying those consignments. As per the modus operandi adopted by the brokers they used to recover the said fake trading bills and challans after the goods reached their des....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... As observed by the Assessing Officer as per an article written by Shri R.P. Varshney, Executive Director, All India Induction Furnaces Association, New Delhi on "Electric Steel Making technology in the 21st Century" which is available on the internet which is on the Electric Induction Furnace and as per the said article the power consumption in Induction Furnace is between 650 to 820 units per MT depending upon the input charge used. The Assessing Officer also referred to the Technical report of the IIT, which states that electricity requirement for manufacturing 1 MT of M.S. Ingots where melting scrap is used as an input, varies from 555 to 754 units and where "Sponge Iron" is used as an input, the electricity requirement varies from 815 to 1046 units. The Assessing Officer, therefore, came to the conclusion that the assessment framed by the Commissioner of Central Excise and Custom, Aurangabad in respect of the alleged suppression of production after considering the electricity consumption declared by the assessee and the production rate of units of electricity per metric ton adopted by the CCE, Aurangabad are very much reasonable, fair and justified and he adopted the same for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd had to be cancelled in turn, relying on the ratio laid down in R.A. Casting (supra). The relevant finding of the Tribunal in turn, incorporating the order of Third Member of CESTAT in paras 19 to 19.4, which read as under:- "19. In sum and substance in both the assessment years the Assessing Officer has determined alleged suppression of the production/sales as determined the Commissioner of Central Excise and Custom, Aurangabad on the basis of power consumption. The copy of the adjudication order passed by the Commissioner of Central Excise and Custom and Service Tax, Aurangabad dated 28-08-2009 (in short referred to as the "CCE") in the case of the assessee is placed at Page Nos. 122 to 174 of the P/B-I. The CCE, Aurangabad has observed that during the scrutiny of electricity bills, it was noticed that the substantial amount of expenditure has incurred by the assessee towards the cost of power consumption (Primary input). He has further observed that from the scrutiny of the various records, the cost of production is much more than cost of sale value, leaving no room for other major expenses like stores, wages, salaries, cost of maintenance etc. The Ld. Commissioner has refe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed the penalty to the extent of Rs. 33,07,22,069/-. 19.2 The said order of the Ld. Commissioner was challenged before the CESTAT by filing the appeal u/s. 35B(a) of the Central Excise Act, 1944. There was a difference of the opinion between the Ld. Members of the CESTAT, i.e. Ld. Vice- President and Ld. Technical Member and the matter was referred to the Ld. Third Member to resolve the following differences: a. Whether in view of the discussion in Para 1 to 31 and in view of the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) the impugned orders are to be set aside and the appeal allowed. b. Whether in view of the discussion in Para 32 to 68 above and in view of the Hon'ble Supreme Court's judgment in the case of Triveni Rubber & Plastics (supra) and this Tribunal's decision in the case of Rattan Steels Works (supra), Nagpal Steel (supra) and Hans Castings Pvt. Ltd. (supra), the impugned order are to be upheld and all the appeals dismissed. 19.3 The Ld. Third Member of the CESTAT concurred with the finding of the Hon'ble Vice-President that the order passed by Ld. Commissioner of Central Excise and Custom, Aurangabad was not sustainable a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....20.3 After perusal of these reports, Tribunal opined that wide variations in the consumption electricity have been reported for the manufacture of one MT of steel ingot&, and that this renders the norm of 1046 units adopted by the Revenue as arbitrary. After this finding, which is upheld by the Hon'ble Allahabad High Court and even SLP has been dismissed, there was no reason for the Commissioner in the instant cases to consider the norm of 1026 units allegedly as per report of Dr. Batra, for arriving at deemed production. Moreover, the trial run conducted by the department had proved that at that time power consumption was actually higher than that reported in Dr. Batra's report. 20.4 It is also seen that the allegations levelled in R,A, Casting (supra) were mainly- (i). Inordinately high electricity consumption without any explanation, (ii). Sale of Ingots at a huge loss over last 4-5 years, which was economically and commercially not possible, (iii). generation of fictitious profits in the balance sheets by depositing huge amount of cash with the stock brokers and receiving cheques of profits against the cash so deposited, (iv). Claim of High Auxiliary load....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellants and others and that too on different dates to adopt-the test results as the basis to arrive at a norm, which can be adopted for future. It was further held that- "23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside* and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onal material is also only of power consumption. 22. In written submissions of Revenue, it has also been contended that Report of JPC suggesting electricity consumption upto 1800 its PMT was for electric arc furnace and not induction- furnace. However, the appellant has contended that productivity in. electric arc furnace is higher than induction furnace. In any event, in the Impugned Orders, there is no such reason to discard the report and in any event the letter of Mr. R.P. Varshney suggesting that electric consumption in induction furnace can be upto 1800 units per MT is also on record. Since, varying reports are on record, the ratio of R.A. Casting (sura) is squarely applicable. 23. Revenue, also relied On the judgment of the Hon'ble Supreme Court in the case of Melton India V/s. The Commissioner Trade Tax, U.P, - 2007-TIOL-14-SC-CT, the judgment of the Hon'ble Gujarat High Court in the case of Rajmoti Industries V/s. Joint Commissioner of Income Tax, 2014-TIOL-203-HC-AHM-IT, and an unreported order dtd. 28/9/2010 of Andhra Pradesh Sales Tax Tribunal (Visakhapatnam Bench) in the case of Venkata Raimana Stone Crushers Company V/s. State of Andhra Pradesh. In the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e brokers and sub-brokers referred by the Assessing Officer was also before the Ld. Commissioner, Aurangabad. On perusal of the assessment orders it is clear that both the assessments are merely based on the alleged suppression of the production by estimating certain consumption of electricity i.e. 1026 Units for manufacturing of 1 MT of Ingots and Billets. Moreover, even if in the A.Y. 2008-09, the Assessing Officer has observed that the information received from the Central Excise Authorities has no bearing in the said order but on the perusal of the said order, it is seen that entire order is copy of order passed for the A.Y. 2007-08. As vary basis of the assessment order i.e. the order of the Commissioner of Central Excise (CCE), Aurangabad has been set aside and cancelled by the CESTAT, in our opinion the assessment orders passed by the Assessing Officer and confirmed by the Ld. CIT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand." 59. The Tribunal thereafter, dealt with the arguments of Ld. Special AR that even the minority decision of Ld. Technical Member of CESTAT was a legal order. This plea of the Ld. Special AR was re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e DGCEI and proceedings before the Settlement Commission were considered by the CCE in its adjudication order, which in turn, was the subject matter of CESTAT and the said order has been set-aside, hence, it was not necessary to deal with the decisions relied upon by the Ld. Special AR, which are in the context of admission of the Director in the course of investigation made by the DGCEI. 62. The second issue of maintaining of Form No.G-7 in respect of electricity consumption, was also before the CESTAT and the Tribunal overruled the arguments of the Ld. Special AR and upheld the arguments of learned Authorized Representative for the assessee that the order of CESTAT had to be applied. The relevant para of the Tribunal order reads as under:- "21. Though the Ld. Spl. AR has referred to and relied on the different judgments of the Hon'ble Supreme Court more particularly on the binding nature of the 'admission' of any person-Sec. 17, Sec. 106 and Sec. 115 of the Indian Evidence Act etc. but the fact remains that in the case of the present assessee no independent investigation is made by the Revenue but the entire assessments are framed on the basis of the information receive....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the observations of Tribunal in earlier proceedings relating to assessment years 2000-01 to 2006-07 under section 153A r.w.s 143(3) of the Act and held that in the said case of search and seizure, it was also held that the consumption of electricity for the manufacture of mild steel, ingots / billets depending on various factors and there was no justification to charge the assessee that it had suppressed the production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon'ble Bombay High Court and the Revenue's appeal was dismissed by common order dated 10.02.2014 in the case of assessee and other companies by the Hon'ble Bombay High Court and there were observations on the estimation of production based on the consumption of electricity. The Tribunal while deciding the appeal of M/s. SRJ Peety Steels Pvt. Ltd. in this regard observed as under:- "22. We have already mentioned here-in-above that in the case of the assesse, the search and seizure operation was carried out u/s. 132(1) of the Income-tax Act on 17-03-2006 and accordingly the assessment orders for the A.Ys. 2000-01 to 2006-07 were framed u/s. 153A r.w.s.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....331059 18,524.239 1313 2001-02 25528565 17,010.558 1501 2002-03 31404354 19,709.654 1593 2003-04 31623843 20,396.313 1550 2004-05 43123824 23,240.189 1856 2005-06 62650888 29,582.434 2118 2006-07 70440580 36,017.983 1956 32. The matter of fluctuating consumption of electricity can by no means be said to be a finding of search since all details regarding electricity visa- vis production were before the Department. If the Department had any doubts regarding the same, it could have been raised during the regular assessments and not in the assessment proceedings under s. 153A of the Act. When nothing incriminating was found in the course of search relating to any of these assessment years, the assessments for such years could not be disturbed on this ground. 33. In view of above factual and legal position we find that the additions in question in asst. yrs. 2000-01 to 2005-06 are not corresponding to the seized material found during the course of search. The relevant IT returns for said years were filed prior to the search in normal course disclosing the particulars of subject-matter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T bars and arrived at a conclusion that there is an excess consumption of electricity resulting in suppressed production and alleging that the assessee company has indulged in unaccounted production. 37. None of the evidence collected as a result of search or detected during the course of assessment pertains to the asst. yrs. 2000-01 to 2005-06. It is an accepted fact that each year of the assessment is independent and evidences found relating to asst. yr. 2006-07 cannot have an adverse impact on the assessments of the assessee company from the asst. yrs. 2000-01 to 2005-06. Therefore, rejection of books for these years purely on the ground that there has been divergence in the consumption of electricity and application of s. 144 is not at all justified. Accordingly additions have rightly been deleted in asst. yrs. 2000-01 to 2005-06 in both the cases. 23. It is clear from the order of the Tribunal in assessee's own case in the search and seizure matter as it is held that the consumption of electricity for the manufacturing of mild steel ingots/billets depends on various factors and there was no justification to charge the assessee that the assessee has suppressed the product....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eral factors which have to be taken into consideration and while arriving at a conclusion with regard to the alleged production calculated on the basis of electricity consumption. Rejection of books for these years only on the ground that there has been divergence in the consumption of electricity, therefore, was held not justified." 24. Ld. Spl. AR for the Revenue argues that the said observations are made in the context of the assessment framed in consequence of search and seizure operation. We are not inclined to accept the argument of the Ld. Spl AR for the reason that even if the assessments are framed in consequence of the search and seizure operation but the important fact remains that nothing was found during the course of search except few loose sheets found in the residence of the Director to make out a case against the assessee for alleged suppression of production or sales. It is also to be taken note of the fact that in A.Ys. 2007-08 and 2008-09, no investigation has been done by the Revenue which are immediate next assessment years after the search and seizure operation against the assessee company and hence, in our opinion above findings and observation of the Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sidered the retraction statement of the Director of the assessee company and vide para 6 held as under: "6. We would have certainly come to the rescue of Revenue had the statement been recorded in a manner known to law and cogent evidence had been brought to record to prove output cleared clandestinely. No cogent evidence is on record to show either suppression of purchase of input or clandestine removal of goods in fool proof manner known to law for which, it can be painfully said that the adjudication has no legs to stand. Both the appeals are therefore, allowed with consequential relief, if any." 11. The Customs, Excise & Service Tax Appellate Tribunal categorically held that the electricity consumption could not be criteria to determine the output laid down in R.A. Castings, where the appeal of the Revenue was dismissed by the Hon'ble Apex Court as reported in 2011 (269) ELT A- 108 (SC). The basis for the addition in the present case was the investigation report of the Central Excise Department and the suppression in production calculated by the said Investigating Team. The Assessing Officer had completely based its addition on the aforesaid report of the Investiga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Nos. 2,3,4 & 6 in the A.Y. 2008-09." 66. The Tribunal thereafter, held that there was no merit in the rejection of books of account and application of gross profit to determine the income in the hands of the assessee. The Tribunal also gave a finding that since the additions made in the hands of the assessee have been deleted, there was no merit in any addition on account of undisclosed investment in respect of the undisclosed turnover. The Tribunal vide paras 27 to 29 held as under:- "27. The next issue is the rejection of books of account by the Assessing Officer in both the assessment years. We find that the only reason for rejection of the books of account was the alleged suppression of production/sales and which was determined on the basis of the adjudication order passed by the CCE, Aurangabad as well as the consumption of the electricity used in the manufacturing of the Ingots/Billets relying on the technical opinion of Dr. Batra, IIT, Kanpur. No other reasons are given by the Assessing Officer. We have already held that the Assessing Officer was not justified in making the additions towards alleged suppression of production/sales. We, therefore, hold that the reject....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the ratio laid down in M/s. SRJ Peety Steels Pvt. Ltd. (supra). Since the basis for addition was the consumption of electricity, though on different ground i.e. consumption of electricity as per US standard. However, the Ld. Special AR stressed that the issue raised in the present appeal was at variance. Vide his written submissions, he has raised identical grounds of appeal and had elaborately took us through various submissions and has relied on different case laws. The contention of the Ld. Special AR is sheer waste of process of law, wherein the submissions made before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) have been verbatim repeated in the appeal filed against the assessee before us i.e. Shree Om Rolling Mills Pvt. Ltd. 69. We find that the Assessing Officer in the present case before us had made the addition on account of erratic consumption of electricity based on the consumption of electricity as per US standards. The Assessing Officer had not adopted the US standards in entirety, but had allowed a credit of 25% and work the addition. The addition in the hands of sister concern M/s. SRJ Peety Steels Pvt. Ltd. was made on the basis of the report of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d held that the addition made towards alleged suppressed production and sales on the basis of consumption of electricity was deleted. In our opinion, the addition made by the Assessing Officer by relying on the consumption of electricity under US standards, by no stretch of imagination, can be applied under Indian conditions, in the absence of any finding that the conditions for carrying out manufacturing activity in US and India were same. The benefit of 25% allowed is without any basis and has no legs to stand. The addition made by the Assessing Officer is on pure estimates, conjuncture and surmises and the same cannot be accepted. We hereby delete the same. 72. Another aspect of the issue in relation to the addition on account of suppressed production, raised before us is that where the Assessing Officer had evidence of clandestine removal of material without payment of Excise duty, the addition could be upheld in the hands of the assessee by extrapolating the sales for period of 300 days. The Ld. Special AR for the said proposition relied on the decision of the Tribunal in assessee's own case relating to assessment year 2006-07. The case of the Revenue before us was that whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat even where the evidence of clandestine removal of material without payment of Excise duty and suppression of income was found for the part of the year, then the Assessing Officer can estimate the additional income for whole of the year. Merely because the Assessing Officer had adopted another methodology of suppression, the addition in the hands of the assessee could be sustained on the basis of extrapolation of sales for 300 days, in view of the admission of the assessee of clandestine removal of material without payment of Excise duty and suppression of income. 73. The evidence of clandestine removal of material without payment of Excise duty was detected by the Excise authorities during the course of search and seizure operation on certain brokers, however, no search and seizure operation was carried out against the assessee. In order to buy peace of mind, the assessee declared the said amount vide petition before the Settlement Commission, which has been accepted by the Settlement Commission in toto. The Ld. Special AR objected to the plea of assessee that declaration was to buy peace of mind, but we find no merit in the same, since the object of moving petition befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the income for the year was extrapolated, which order of the Tribunal was approved by the Hon'ble Bombay High Court. However, for the year under consideration, there was no search and seizure operation carried out by the Income-tax Department against the assessee and also no investigation or inquiry was made by the Assessing Officer, as stated earlier. In the absence of any evidence collected against the assessee, merely because the addition was made in the hands of the assessee in a preceding year, we find no merit in the submissions of the assessee that following the same ratio, extrapolation of sales for the assessment year 2007-08 should be made in the hands of the assessee, in view of the settlement petition by the assessee before the Settlement Commission. The perusal of the assessment order and the order of CIT(A) reflects no such basis was adopted for making the addition in the hands of the assessee. The sole basis on which the addition in the hands of the assessee made was on account of erratic consumption of electricity. Undoubtedly, both the aspects i.e. the petition made by the assessee before the Settlement Commission pursuant to search conducted by the DGCEI and also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Officer and this was the evidence available with the Assessing Officer. The alleged admission before the Assessing Officer was only by way of the additional income offered by the assessee, which was relatable to the clandestine removal of material without payment of Excise duty admitted before the DGCEI and offered by way of petition before the Settlement Commission. No statement of Directors of the assessee company was recorded either by Assessing Officer or CIT(A) during the course of assessment proceeding. Accordingly, we find no merit in the reliance placed upon by the Ld. Special AR in this regard. The addition at best is to be restricted to the additional income offered by the assessee. 79. In our considered opinion, the issue in hand is to be decided on the basis of findings of the Assessing Officer and CIT(A) and the Tribunal cannot traverse beyond the orders of Assessing Officer and CIT(A). Admittedly, the parties can raise an additional plea before the Tribunal justifying the addition. However, the said plea has to be decided keeping in mind the facts of the case. Though both the Assessing Officer and CIT(A) had not made the addition in the hands of the assessee on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or 56 days and the Assessing Officer estimated the sales for the remaining period. The addition was deleted in the hands of the assessee and was restricted to the income declared by the assessee on the basis of papers seized, for which the assessee had filed a petition before the Settlement Commission and income on that account was declared by the assessee. The Tribunal held that no further addition could be made in the hands of the assessee for the balance period. The Tribunal further held that hypothetical calculation of turnover and estimation of gross profit merely on guess work and presumption was not sustainable in law. No details were available to the Assessing Officer to arrive at such figure or had there been any concealed sales for 9 months, it could have been detected by the Central Excise authority during their search operations. Therefore, the addition made by the Assessing Officer is purely based on guess work, presumption and surmises and not on the basis of any material found during the course of search operation carried out by the Central Excise authorities. Such addition based on hypothetical calculation of turnover and estimation of GP on presumption and surmises....
X X X X Extracts X X X X
X X X X Extracts X X X X
....moval of goods or suppressed sales, in the absence of evidence for the balance period. The above said ratios have been laid down in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra), Hon'ble Bombay High Court in CIT Vs. C.J. Shah & Co. (supra), Hon'ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra). The Ld. Special AR had placed reliance on the decision of Hon'ble Bombay High Court in CIT Vs. Dr.M.K.E. Memon (supra) while arguing the issue No.2 i.e. estimation of suppressed production is mis-placed. The Hon'ble Bombay High Court in the said decision considered the scope of assessment under Chapter XIV-B and held that what is to be assessed under the said Chapter is undisclosed income of the block period and not the total income or loss of the previous year required to be assessed under regular assessment under section 143(3) of the Act. The Hon'ble Bombay High Court held that such regular assessment stands on a different footing in contrast to the exercise undertaken by the Assessing Officer under Chapter XIVB, where the Assessing Officer had to assess only the undisclosed income. However, the Hon'ble Bombay High Court further held that under Chapter XIV-B, the Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the theory of preponderance, in turn relying on the ratio laid down by the apex court in Sumati Dayal Vs. CIT (supra) and Collector of Customs Madras and others Vs. D. Bhoormull (supra), which was also relied upon by the Ld. Special AR in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and the same had been considered by the Tribunal. During the course of hearing, the Ld. Special AR relied on series of other decisions, but the ratios laid down by the said judgments are distinguishable and not applicable to the facts of the present case. It may be put on record that all these decisions were relied upon by the Ld. Special AR in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and same have already been considered. 88. In the entirety of the above said facts and circumstances, we hold that no extrapolation of sales for 300 days can be made in the hands of the assessee on the basis of the evidence found for clandestine removal of material without payment of Excise duty for few days, which in turn, has been admitted by the assessee by way of filing petition before the Settlement Commission, which in turn, has also been accepted by the Settlement Commission. Merely because the Settlement Commissio....