TaxTMI 
TaxTMI 
2015 (11) TMI 14
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....tt. Year 1. ITA Nos.284 to 286/PN/2012 Bhagyalaxmi Steel Alloys Pvt. Ltd. 30/12/2011 2006-07 to 2008-09 ITA Nos.437 to 439/PN/2012 2. ITA Nos.179 to 182/PN/2012 Omsairam Steel & Alloys Pvt. Ltd. 06/01/2012 2005-06 to 2008-09 ITA Nos.656 to 659/PN/2012 3. ITA No.1084/PN/2012 Omsairam Steel & Alloys Pvt. Ltd. 30/04/2012 2004-05 ITA No.1468/PN/2012 4 ITA No.1466/PN/2012 M/s Rishi Steel & Alloys Pvt. Ltd. 30/04/2012 2004-05 ITA No.1523/PN/2012 5 ITA Nos.142 to 146/PN/2012 Matsyodari Steel & Alloys Pvt. Ltd. 09/01/2012 2004-05 to 2008-09 ITA Nos.631 to 635/PN/2012 6 ITA Nos.214 & 215/PN/2012 Jalna Siddhivinayak Alloys Pvt. Ltd. 30/12/2011 2006-07 & 2007-08 ITA Nos.412 & 413/PN/2012 2. This bunch of appeals relating to the 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.284/PN/2012 and ITA No.437/PN/2012 to adjudicate the issues. 3. In ITA No.284/PN/2012, the assessee has raised the following grounds of appeal....
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....ssioner of Income Tax (Appeals) further erred in confirming the addition on account of Gross Profit @ 4% on the alleged suppression of sale of Rs. 28,59,32,329/-. 10. The learned Commissioner of Income Tax (Appeals) further erred in making addition on account of undisclosed investment required for undisclosed turnover of Rs. 27,49,349/-. 11. The learned Commissioner of Income Tax (Appeals) further erred in not holding that the order passed by the Assessing Officer u/s.143(3) r.w.s. 147 is void and not valid in law as the same has been passed without issue of notice u/s.143(2) of the I.T. Act. 12. The learned Commissioner of Income Tax (Appeals) further erred in not following the order of the Hon. Income Tax Appellate Tribunal in the case of M/s. SRJ Peety Steels Pvt. Ltd. for assessment years 2000-01 to 2006-07 reported in 137 TTJ (Pune) 627, wherein the similar addition was deleted. 13. 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." 4. In ITA No.437/PN/2012, the Revenue has raised the following grounds of appeal:- "1. Whether on the facts and in the circumstances o....
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....assessment proceedings asked the assessee as to why the consumption of electricity per metric tonne should not be adopted for the purposes of calculation of suppression in production as per the order of the CCE, Aurangabad's show-cause notice. In response, the stand of the assessee was the same as before the CCE, Aurangabad. The Assessing Officer was of the view that the books of account of the assessee do not reflect the true and correct picture of manufacturing results and the same were rejected under section 145(1) of the Act. The Assessing Officer also noted that the order of the CCE, Aurangabad was in respect of Furnace companies in Jalna district. The Assessing Officer computed the addition of Rs. 28,59,32,329/-. 6. The CIT(A) noted that various manufacturers to MS ingots/billets were in appeal and the contention of the said persons were that the undisclosed production calculated on the basis of electricity consumption was not justified. Even though addition on account of clandestine removal of MS ingots/billets in the year under appeal was agreed to purchase peace of mind and to avoid litigation. The CIT(A) in the bunch of appeals held as under :- "7.2 I have carefully....
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....pellant on the above referred decision is misplaced. Further, the other decisions relied on by the appellant in support of its above contention are also distinguishable on facts as in the said cases the clandestine removal of goods was not proved and admitted as in the case of the appellant. Further, the reasons for estimating the production on the basis of electricity units consumed were not present in the said cases. (6) The contention of the appellant that the books of accounts are regularly maintained and audited cannot be accepted in view of the clandestine removal of goods and the unaccounted purchases and sales admitted by the appellant and also in view of various reasons mentioned by the A.O. in the assessment order. (7) The appellant has not maintained information in form No.G-7, which is compulsory, showing daily consumption of power in units. (8) The facts of the decisions relied on by the appellant are different and ratio laid down by the said decisions in the case of ACIT Vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune) in respect of gross profit addition can only be applied with some alteration considering the fact of ....
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....01/03/2011 in the case of the appellant and others, I hold that there is suppression of sale and profit in the years under appeal and hence the profit declared by the appellant cannot be accepted without making further addition on account of profit on suppressed sale. 7.4 In view of the above facts, observations and discussion and also in view of various reasons mentioned by the A.O. in the assessment order, I am of the considered view that the A.O. is justified in arriving at the suppressed production/sale of MS ingots/billets on the basis of electricity unit consumption. The first issue is, therefore, decided against the appellant." 7. The assessee is in appeal before us against the said order of the CIT(A), which in turn was passed pursuant to the order passed in the case of SRJ Peety Steels Pvt. Ltd.. 8. The Ld. Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeal is squarely covered by the ratio laid down by the Tribunal in SRJ Peety Steels Pvt. Ltd. vs. Addl.CIT in ITA Nos.123 & 124/PN/2012 relating to assessment years 2007-08 & 2008-09 and in cross-appeal filed by the Revenue in ITA Nos.435 & 436/PN/2012 re....
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....tified. He further admitted that the case laws relied upon were cited before the Tribunal in SRJ Peety Steels Pvt. Ltd. (supra) which were dismissed on the ground that no evidence was found against the assessee. It was pleaded by the Ld. Special AR that the Central Excise Commissioner had considered the case and came to a finding that there was a clandestine removal of goods. Reliance was placed upon the ratio laid down by the Hon'ble Supreme Court in Sumati Dayal vs. CIT reported in 214 ITR 801 (SC) for the proposition of preponderance of probabilities. The Ld. Special AR submitted that though the Assessing Officer at page 2 observed that the books of account were produced but in para 4.2 the Assessing Officer states that the details were not given. It was further vehemently stressed by him that the issue in the present case is not covered by the ratio laid down in SRJ Peety Steels Pvt. Ltd. (supra) and in any case the decision is not final. The Ld. Special AR pointed out that according to the assessee the decision of Hon'ble Allahabad High Court in R.A. Castings (supra) has been affirmed by the Hon'ble Supreme Court but there is no decision of Supreme Court as only the SLP has be....
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....d Representative for the assessee submitted that it is agitating the reopening under section 147 of the Act, wherein no reasons for reopening the assessment were given to the assessee and also no notice under section 143(2) of the Act was served upon the assessee. The Ld. Authorized Representative for the assessee pointed out that the assessee before the CIT(A) had received the reasons for reopening the assessment under section 148 of the Act and hence it is not aggrieved by the said grounds of appeal i.e. issue raised vide grounds of appeal No.1 and 2. However, it is strongly objected to non-issue of notice under section 143(2) after initiation of proceedings under section 148 of the Act. The Ld. Authorized Representative for the assessee placed reliance on the following decisions :- (i) Manish Prakash Gupta vs. CIT, 249 CTR 57 (Allahabad); (ii) Parikalpana Estate Development (P) Ltd. vs. CIT, 220 taxmann.com 39; (iii) Cebon India Ltd. vs. CIT, 347 ITR 583; and, (iv) Salman Khan in ITA No.508/2010 dated 06.06.2011. 12. The Ld. Special AR on the other hand pointed out that the notice under section 143(2) of the Act was served upon the assessee and the copy of the sam....
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....years 2006-07 to 2008-09. 16. The Ld. CIT-DR for the Revenue referred to the show-cause notice issued by the Excise Authority in which the documents and statements of the various persons were referred. It was pointed out by the Ld. CIT-DR that there was evidence on both the captive consumption of electricity in the case of the assessee and also clandestine removal of material without payment of excise duty. It was further pointed out by her that the Third Member of CESTAT had given relief only on the erratic consumption of electricity, whereas the Tribunal in the appeal relating to assessment year 2006-07 had upheld the extrapolation of sales for the entire year on the basis of the evidence found for part of the year. Another contention raised by the Ld. CIT-DR was that the report of Professor Batra on the basis of which the erratic consumption of electricity was linked with the production, was part of the financial report made by the Government of India and on this account difference had to be added in the hands of the assessee. It was pointed out by the Ld. DR that the Revenue was in appeal against the order of the CIT(A) in challenging the GP rate of 4% and further in allowin....
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....s consented. On reassembling of the Bench, the Special AR for the Revenue furnished letter under his signature stating that the Pr.CIT, Aurangabad was contemplating to file certain petitions before the Hon'ble President/Vice President, ITAT, Mumbai and therefore the matter should be adjourned for three weeks. However, the nature and contents of the petition contemplated was not made known. The Special AR for the Revenue was asked to continue his arguments by the Bench, but he referred to his adjournment letter. 19. The Counsel for the assessee started his argument. However, the Special AR for the Revenue walked off from the Court Room. The Counsel for the assessee also furnished written rejoinder in reply to the submissions filed by the Special AR for the Revenue, parawise which were gone into at length. Though, in the course of hearing, the Special AR for the Revenue left the Court proceedings, on the other hand, Smt. M.S. Verma, Ld. CIT-DR and Shri Rajesh Damor, Ld. Addl.CIT-DR were present in the Court. Thereafter, other cases which were to be argued by the Ld. CIT-DR and Ld. Addl.CIT-DR were taken up for hearing and the matters in ITA Nos.125, 127, 430 & 431/PN/2012 along wi....
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....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. 24. 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 assessees before us are relatable to the addition made on account of alleged suppression of production and evasion of duty on account of erratic consumption of electricity. 25. Now, we are coming to the merits of the issue raised before us. We have heard this bunch of appeals where different issues are raised i.e. in some cases where t....
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...., in the case of the assessee before us, there is order of CCE, Aurangabad and there is order of Third Member of CESTAT. In some of the years, the owners of furnace on the basis of certain information gathered by the DGCEI had moved a petition before the Settlement Commission and offered additional production, which was accepted by the Settlement Commission in entirety. The Assessing Officer observed that there was suppression of production by the furnace companies 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. 28. 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....
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....2 and the rejoinder of the assessee in paras 12 to 12.1 at pages 22 to 24 of the order, the Tribunal observed as under:- "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 lette....
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....ments in consequence of search and seizure action u/s. 132(1) of the Act were completed. 15. It is also to be taken note of 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 ....
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....er, has given the examples or reference of some other manufacturers against whom action taken by the Central Excise authorities. 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 ele....
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....hird Member of CESTAT in group of cases of furnace owners held that the order of CCE, Aurangabad was not sustainable and 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....
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....nity from criminal proceedings. The Ld. Commissioner confirmed the demand raised in the show cause notice and also levied 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 H....
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.... as per the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 851 units/MT in the case of Nagpal Steel v. CCE, Chandigarh reported in 2000 (125) E.LT. 1147, 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 no....
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....elying on the same and the findings of the Commissioner, as recorded earlier, have not been challenged by the Revenue. All these other allegations were also levelled in R.A. Casting (supra). It was further observed in R.A, Casting (supra) that it would 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. 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....
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....ne MT of Ingots has reduced in factories of all the appellants, I am of the view that it cannot be-.a" basis to sustain the findings in the impugned Orders by assuming that there could not be any reason for lower consumption of electricity during the subsequent period. I also agree with the finding of the Hon'ble Vice President that in. any event, this additional 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 ....
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.... is pertinent to note here that the Ld. Commissioner has also considered the investigation made by the DGCEI against some brokers and in consequence the show cause notices (SCN) were issued to the assessee and other companies and the assessee and other companies came forward before the Settlement Commission and paid the excise duty. Hence, the investigation of the DGCEI made against the 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 op....
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....venue, but the entire assessment was framed on the basis of information received from the Central Excise Department as well as the adjudication order passed by the CCE, Aurangabad, which in turn, had been cancelled by the Third Member of CESTAT. The Tribunal thus, held that the foundation for assessment does not exist. It was also noted by the Tribunal in para 21 that the investigation by the 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 setaside, 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. 34. 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 r....
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....ied out under section 132(1) of the Act on 17.03.2006 against M/s. SRJ Peety Steels Pvt. Ltd. and the assessment framed under section 153A r.w.s. 143(3) of the Act. The assessee therein i.e. M/s. SRJ Peety Steels Pvt. Ltd. had filed an appeal before the Tribunal and the order of the Tribunal is reported in 137 TTJ (Pune) 627. The Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) referred 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 electr....
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....r which were accepted year after year along with the returns and no query was ever raised by the Department. The following chart shows the year-wise production vis-a-vis electricity consumption which has been placed before the authorities below along with the returns for each year: Asst. yr. Electricity consumption Production (MT) Yearly average consumption (units) 2000-01 24331059 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 vis-a-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 assessme....
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....lets depends on various factors like quality of raw material which is the major input, voltage of the supply, power interruptions, mechanical and electrical breakdowns and the chemical composition of the liquid metal which has to be finally cast into ingots/billets. The AO failed to appreciate these facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacture of round/TMT 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 jus....
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....as found in the course of search relating to these assessment years. The additions, therefore, were not corresponding to the seized material during the course of search. The relevant income tax returns, in normal course, are disclosing the particulars. They were already on record. The returns have been accepted. In such circumstances, the Tribunal, as also, the Commissioner of Income Tax (Appeals) have in their orders, held that there are several 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 exc....
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....that So far as the production quantum is concerned, there is also no evidence on record to show that the authorities intervened lawfully recording the output in the presence of witness. The Customs, Excise & Service Tax Appellate Tribunal held that therefore, a hypothetical case appears to have been made by Revenue in excessive exercise of its jurisdiction to the detriment of justice. The Customs, Excise & Service Tax Appellate Tribunal further considered 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 c....
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....f 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 well as on the basis of consumption of the electricity used in manufacturing of Ingots/Billets are not sustainable. We, accordingly, delete the additions made towards the alleged suppression of production and sales at entirety and allow the Ground Nos. 3, 4, 5, 6 & 8 in the A.Y. 2007-08 and Ground Nos. 2,3,4 & 6 in the A.Y. 2008- 09." 38. 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 w....
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....ssion 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 deleted in both the assessment years by allowing the grounds taken by the assessee. Accordingly, all the grounds of the Revenue in both appeals are dismissed." 40. The plea of the learned Authorized Representative for the assessee before us was that the issue raised in the present appeals is squarely covered by the ratio laid down in M/s. SRJ Peety Steels Pvt. Ltd. (supra). It was further pointed out by him that in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there was no investigation by the DGCEI and further there was no order of Settlement Commission. However, the CCE, Aurangabad had passed an order against the assessee, but there was no case of clandestine removal of materials without payment of Excise duty against the assessee. The Ld. Special AR admitted that there was no evidence with the Excise Department or the Income-tax Department regarding clandestine removal of materials without payment of Excise duty. However, because of huge fluctuation in electricity consumption and production of ingots / billets, addi....
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....us 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. 43. 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 where the assessee had admitted to clandestine removal of material without payment of Excise duty before the Settlement Commission for part of the period, then in view of....
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.... 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. 44. 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 before the Settlement Commission is to settle the dispute. In cases where any settlement petition is moved by the claimants, the authorities have the power to re-visit the offer made by the claimant and where any adverse material is avail....
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....epartment 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 the other basis i.e. erratic consumption of electricity, were before the Assessing Officer. However, the Assessing Officer adopted the second issue in the hands of the assessee and made the aforesaid addition, which we in the paras h....
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....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. 50. 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 the basis of petition filed before the Settlement Commission, but had adopted the erratic consumption of electricity as basis to make the addition, we have adjudicated the alternate plea raised by the Ld. Special AR in this regard and dism....
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.... 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 were not sustainable. The Tribunal distinguished the ratio laid down in CST Vs. H.M. Esufali H.M. Abdulali (supra). The Ld. Special AR relied on the said decision and in view of the decision of coordinate Bench on similar issue as before ....
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....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 XIV-B, 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 Assessing Officer cannot estimate the undisclosed income on an arbitrary basis. We find no merit in the plea raised by the Ld. Special AR in this regard as the facts of the said case are different from the facts of the present case. 42. Ev....
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....n 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. 59. 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 Commission accepted the claim of the assessee of additional Excise duty payable on the said clandestine removal of material without payment of Excise duty does not establish the case of the Revenue that the said figures of additional production shoul....