TaxTMI 
TaxTMI 
2015 (11) TMI 14
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.... 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:- "1. The learned Commissioner of Income Tax (Appeals) erred in confirming the re-opening of the assessment u/s. 147 of the Incom....
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....f 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 of the case the CIT(A) was justified in quantifying the suppressed production @ 4% even after accepting the fact that the assessee indulged in clande....
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....n 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 considered the facts of the case and the rival contentions raised by the appellant in para-7.1 above and raised by the A.O. mentioned in para-5 above. On p....
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....ishable 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 the case of the appellant. (9) The various manufacturers of MS ingots/billets have filed petition for stay of recovery of Excise on alleged undisclosed production....
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....ted 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 relating to assessment years 2007-08 & 2008-09 vide order dated 16.01.2015. The Ld. Authorized Representative for the assessee further pointed out that the appeal of the Revenue is also similarly co....
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....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 been dismissed. 10. In rejoinder, the Ld. Authorized Representative for the assessee pointed out that the assessment in the hands of the assessee had been re-opened on the basis of the order of the C....
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.... 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 same would be filed on the next date. It may be clarified here that no such copy of notice issued under section 143(2) of the Act was filed by the Ld. Special AR. He further placed reliance on the ratio laid down by....
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....e 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 allowing the manufacturing and administrative expenses on unaccounted production worked out in the hands of the assessee. The issue in ground of appeal No.3 was against the deletion of the working capital required for investments in una....
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....t, 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 with ITA No.1525/PN/2012, ITA No.1476/PN/2012, ITA Nos.179 to 182/PN/2012, ITA Nos.656 to 659/PN/2012, ITA No.1084/PN/2012, ITA No.1468/PN/2012, ITA No.1558/PN/2012, ITA No.1629/PN/2012, ITA No.1516/PN/2012 and ITA No.1638/PN/2012 were h....
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....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 the assessment is completed under section 143(3) r.w.s. 148 of the Act, the assessee has raised the issue against re-opening of assessment, non-supply of reasons for re-opening under section 147 and also non-service of notice under section 143(2) after recordi....
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....nt 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 by CCE, Aurangabad and vide order dated 16.01.2015 held that since the order of the CCE, Aurangabad has been overruled by the Third Member of CESTAT, there was no basis for addition in the hands of the assessee. The other aspects of the issue that the assessee the....
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....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 evasion of excise duty, the Assessing Officer initiated the re-assessment proceedings for A.Y. 2007-08 against the assessee company u/s. 147 of the A....
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....ome 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 destination. As noted by the Assessing Officer those brokers/sub-brokers also admitted that the entire evidence was destroyed by them and they used to....
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...., 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 the purpose of calculation of alleged unaccounted production of finished goods (Para No. 4.3 of the assessment order). 17. The Assessing Officer ....
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....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 referred to the study conducted by the Indian Institute of Technology (IIT), Kanpur and has observed that as per the said "Technical Opinion Report" the consumption of electricity for manufactu....
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...., 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 and has to be cancelled. The operative part of the order of the Third Member is as under: "20. It is also seen that the Hon'ble Vice President correctly opined that the judgment in R.A. ....
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....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 of about 35%, However the Tribunal in categorical terms held that no demand can be upheld based on electricity consumption as such because the clandestine manufacture and removal of excisable goods ....
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.... 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 is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot ....
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....s 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 case of Melton India (supra), for the norm, of power consumption, actual electricity consumption of the assessment year 2000-01 was taken as 'norm' and the same was applied in subsequen....
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.... 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." 31. 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 rejected by the Tribunal in view of the decision of Third Member of the CESTAT. 32. Another objection raised by the Ld. Special AR was with reference to the order of Settlement Commission passed i....
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....ce, 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 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 received from the Central Excise Department as well as the adjudication order passed by the Ld. Commissioner of Central Excise, Aurangabad. Moreover, as observed above the adjudication Order passed by the CCE, Au....
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....lso 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. 143(3) of the Act. The Assessing Officer rejected the books of account of the assessee for the A.Ys. 2000-01 to 2006-07 and one of the reasons was that alleged suppressed production which was computed on the b....
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....580 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 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-matters were already on record. The returns have already been accepted and no assessment as such could be said to be pending on the date of initiation of search and abated in light of the provisions of s. 153A. 34. Without prejudice to above, with regard to invoking the provisions of s. 145 o....
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....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 production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon'ble High Court of Bombay Bench at Aurangabad by filing the appeal u/s. 260A of the Income-tax Act, being Tax Appeal No. 30 of 2011. The Revenue's appeal was dismissed ....
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....tricity, 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 Tribunal as well as the Hon'ble High Court are also important to decide the present appeals more particularly on the additions based on consumption of electricity." 37. The Tribunal vide para 24 took note of the fact that in assessment years 2007-08 and 2008-09, no investigation was done ....
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....andestinely. 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 Investigating Team and had also show caused the assessee to establish its point in view of the said report of the Investigating Team. The Customs, Excise & Service Tax Appellate Tribunal (supra) in the appeal filed by the assessee and its Director has categorically held that no cogent evidence has been b....
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....s 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 rejection of the books of account on above reason cannot be upheld. We, accordingly, allow Ground No. 7 in the A.Y. 2007-08 and Ground No. 5 in the A.Y. 2008-09. 28. The next issue is the percentage of the gross profit estimated by the Ld. CIT(A) on the alleged suppressed sales and said issue arises fr....
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....r 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, addition was made in the hands of the assessee. However, in Omsairam Steel & Alloys Pvt. Ltd., it was fairly admitted by the learned Authorized Representative for the assessee that there was investigation by the DGCEI and in assessment years 2006-07 and 2007-08, the assessee had filed the petition before the Settlement Commission, which was accepted. However, in assessment years 2005-06 and 2008-09, there was no such petition filed before the Settlement Commission. 41. 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 report of Dr. Batra. The addition in the hands of sister concern M/s. SRJ Peety Steels Pvt. Ltd. was made on the basis of the report of one Dr. Batra with ....
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....e 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 the order of the Settlement Commission and also since the assessee had admitted to additional income on such account before the Assessing Officer, the sales for the entire year should be extrapolated. The basis for declaration of clandestine removal of material without payment of Excise duty was on account of search and seizure proceedings conducted by DGCEI on certain brokers and sub-brokers. Consequent thereto, Shri SRJ Peety, Managing Director of M/s. SRJ Peety Steels Pvt. Ltd. admitted to the said clandestine removal of material without payment of Excise duty and approached the Settlement Commission for payment of Excise duty on the said amount. The Settlement Commission accepted the petition of the assessee, but also levied penalty. The assessee before the Assessin....
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....sion 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 available against the person making the offer, then the figures of settlement can be increased. However, in the case of the assessee, offer of the assessee has been accepted for the financial year and the same cannot be said to be restricted to the number of days for which it was offered. The basis of any settlement is the offer made by the claimant and/or the evidence found against the person offering the settlement and where the evidence has been found for part of the year, such settlement being accepted is relatable to the year under consideration. In cases where the petition is accepted in the hands of the assessee by the Settlement Commission, then no further addition can be made in the hands of the assessee on account of alleged clandestine removal of material without pay....
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....onsumption 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 hereinabove had already deleted. The Ld. Special AR pointed out that the said action of the Assessing Officer was one of the methodologies for working out the additional income of the assessee. We find no merit in the stand of the Ld. Special AR since no investigation or inquiry was carried out by the Assessing Officer and merely on the basis of petition filed before the Settlement Commission, which in turn has been accepted, no further addition can be made in the hands of the assessee in the absence of any incriminating material found for the balance period. 47. Reliance in this regard is placed upon the ratio laid down in Ravi Foods Pvt. Ltd. Vs. CCE, Hyderabad (supra). In the facts of the said case, certain documents were found by the Income-tax Department pursuant to searc....
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.... 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 dismissed the same. 51. Now, we come to the reliance placed upon by both the Authorized Representatives in support of individual proposition vis-à-vis the addition on account of extrapolation of sales for the period of 300 days. 52. The Ld. Special AR further relied on series of decisions under the Excise authorities for the proposition that the confessional statement before the Excise Department was an important piece of evidence. We are in agreement with the said proposition laid down by the Hon'ble Supreme Court in Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala and another (supra), but the statement made before any of the authorities is limited to the amounts surrendered vide the said settlement and no inference could be drawn against the assessee for extrapolating the....
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.... 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 us, we find no merit in the reliance placed upon by the Ld. Special AR. 56. The Ld. Special AR during the course of arguments before the Tribunal in Miscellaneous Application filed in M/s. SRJ Peety Steels Pvt. Ltd. vide MA No.17/PN/2015 had raised the issue of extrapolation of sales for 300 days in view of the assessee having admitted to clandestine removal of material without payment of Excise duty and thereafter, filing a petition before the Settlement Commission. 57. The plea of the Revenue raised in the Miscellaneous Application was rejected as no such plea was taken by the Department during the appellate proceedings before the Tribunal and was raised for the first time in the Miscellaneous Application. However, in the interest of justice, the said issue of extrapolation of suppressed sa....
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....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. Even on merits, the Revenue has no case against the assessee. The reliance placed upon by the Ld. Special AR on the ratio laid down in assessee's own case relating to assessment year 2006-07 is misplaced as the addition in the hands of the assessee in that year was made on account of search and seizure operations carried out by the Income-tax Department, wherein sales outside books were found for few days. However, no independent investigation / inquiry by the Income-tax Department has been made before completing assessment proceedings against the assessee. Another aspect of the issue is that the petition before the Settlement Commission has been made by the assessee in assessment year 2007-08 only and no such petition for clandestine removal of material without payment of Excise duty has been made for ....
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....tion 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 should be utilized for extrapolating the sales in the hands of the assessee for the entire year. Admittedly, the assessee had offered additional income on the said clandestine removal of material without payment of Excise duty, which is to be added as income in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that in case the said additional income has not been added while computing the income in the hands of the assessee for the respective years, the same may be directed to be added in the hands of the respective assessee in respective years. Accordingly, we direct the Assessing Officer to verify from the records for the respective years and include the additional income on account of such admitted clandestine removal of material without payment of Excise du....