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2015 (12) TMI 988
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....was selected for scrutiny and notice under section 143(2) of the Act was issued to the assessee. Further, the case was referred seeking directions under section 144A of the Act and in response to which, the JCIT issued specific written directions vide letter dated 14.12.2011. The Assessing Officer received information from the office of the Commissioner of Central Excise and Customs, Aurangabad vide letter dated 29.03.2010 that the assessee had indulged in suppression of production and clandestine removal of finished products without payment of Excise duty. The adjudication order of CCE, Aurangabad quantifying the value of suppressed production was also available with the Assessing Officer. In view thereof, the assessee was show caused as to why the amount of income escaping assessment should not be added in the hands of the assessee. The Assessing Officer considered the manufacturing process of the assessee in detail and noted that the electricity was one of the major cost input in the manufacture of ingots / billets and also accounts for major share of expenses. After going through the information furnished by the assessee i.e. the figures of input and output ratio an....
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....sale out of the books. (3) The Commissioner of Excise in his order and the A.O. have reasonably estimated, after considering various reports and studies in respect of electricity consumption required for producing MS ingots/billets, at 1026 electricity units per Metric Ton. (4) The A.O. has also pointed out that there is substantial variation in various months and in respect of various manufacturers of MS ingots/billets in electricity consumption required for the quantum of goods produced, which is abnormal. The A.O. has also noted substantial variation in yield and shortages during various months in the years under appeal. (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 "Afferent 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 ....
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.... are as under - "(a) Cost of electricity and raw material shown to be 125% of selling price of ingots. (b) Sanctioned auxiliary load was only 7. 8% of the total sanctioned load but claimed to be 25% by appellant in statement; (c) Commissioner of Income Tax (Appeals)' confirmed net addition of Income of Rs. 23.5 lakhs on account of suppressed production of ingots for assessment years 2001 -02 to 2006-07. (d) Clandestine clearance for specific case admitted before Settlement Commission. The Hon'ble CESTAT has also taken support of decision of Hon'ble Madras High Court in the case of Alagappa Cement Pvt. Ltd. Vs. CEGAT & CCE, Trichy (2010-TIOL-770-HC-MAD-CX) and held that the Revenue cannot be faulted for demanding duty on the steel ingots which could have been manufactured by consuming excess quantity of electricity. The Hon'ble Appellate Tribunal has held in concluding para-22 that "none of the appellants except M/s Shree Steel Castings has made out the prima-facie case on merits. They cannot raise a valid plea of limitation either. Suppression of relevant facts is inbuilt in clandestine production of Excisable goods and its removal wi....
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.... confirming Assessing Officer's estimate of alleged suppressed production without Assessing Officer granting the copies material relied by Assessing Officer and opportunity to examine the parties. 6. Without prejudice to above grounds, the learned CIT(A) erred in confirming addition of Rs. 58,12,720/- under the head Gross Profit on suppressed sales and the same addition may please be deleted. 7. Assessee denies its liability of Interest u/s. 234 ABC of Income Tax Act and the same may please be deleted. 8. Your Appellant craves leave to add, alter, amend, modify and/or withdraw any of the ground/s during the course of hearing as occasion may demand. 9. Appellant prays for just and equitable relief." 5. The Ld. Counsel for the assessee at the outset submitted that the issue stands squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Bhagyalaxmi Steel Alloys Pvt. Ltd. and Vice-versa vide ITA Nos.1292/PN/2012 & 1478/PN/2012 for A.Y. 2009-10 and other connected appeals vide consolidated order dated 15-07-2015. Further, the Coordinate Bench of the Tribunal in the case of Mahavir Steel Re-rolling M....
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....onducted in the factory of most of the appellants and on such experiments / trials, the consumption of electricity was found to be more than 1026 units per MT. In view thereof, the facts of the present case are at variance to the facts before the Tribunal in assessment years 2006- 07 and 2007-08 wherein the case of the Excise Authority was that the consumption of electricity was not in accordance with the report of Dr. Batra. However, the said factual aspect has been overturned by the investigation carried out by the Excise Authority at the premises of the assessee on different dates as mentioned hereinabove and the findings of the Authority were as under :- Sr. Sr. No. Appeal No. Manufacturer Appellant Period of dispute Duty amount and penalty Details of experiment 1. E/86268/2014 SRJ Peety Steel Pvt. Ltd. January 2008 to March 2009 Rs.12,41,64,392 & equal penalty Specific verification of electricity consumption on 4.3.2009 showed electricity consumption of 1496 units per MT using mix input of scrap and sponge Iron. 2. E/86151/2014 Bhagyalaxmi Steel Alloys Pvt. Ltd. April 2008 to March 2009 Rs.5,91,23,193 ....
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.... was done on 25.3.2009; however copy thereof was not give to appellant. 11. E/86331/2014 Saptashrungi Alloys (P) Ltd. April 2008 to March 2009 Rs.1,61,53,031/- & equal penalty No verification of electricity consumption was done during the relevant period. 10. The Division Bench of CESTAT had set-aside the order of the CCE, Aurangabad on account of additions made in the hands of the assessee because of erratic consumption of electricity. The relevant finding of the order of CESTAT reads as under :- "In the impugned order the adjudicating authority has not considered the specific verification conducted by the departmental officers, who ascertained the actual consumption of electricity to manufacture of 1MT of MS Ingots is more than 1026 units for per MT as alleged in the SCN's, when the appellants have specifically taken this defense. In fact, the specific inspection/experiment which has been conducted to ascertain the electricity consumption to manufacture 1MT of MS Ingots is vital evidence, which has not been considered by the adjudicating authority. If the physical verification report conducted by the Revenue would have been t....
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....consequential relief and stay applications are also disposed of in the above terms." 11. The addition on account of suppressed production made in the hands of the assessee was deleted by the Division Bench of CESTAT vide order dated 22.10.2014, wherein on specific inspection / experiments by the authorities, conducted to ascertain the electricity consumption to manufacture one MT found that the consumption of electricity was more than 1026 units per MT. The case of the Excise Department was that 1026 units per MT were required to manufacture one MT of MS ingots / billets and the assessee was issued show cause notice in this regard. However, since the physical verification conducted by the Excise Department reflected higher consumption of electricity, the Tribunal came to a finding that in view of the additional evidences of specific verification / trial conducted by the Revenue to ascertain the actual electricity consumption, which worked out to more than 1026 units per MT, there was no basis for making any addition in the hands of the assessee. The Tribunal also referred to its earlier order in the case of different assessee's, where similar addition was deleted. 12. The ....
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....ertain 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 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/P....
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....ssed 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 un-accounted 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 as....
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....E, 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 by CCE, Aurangabad and vide order dated 16.01.2015 hel....
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....e 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 letter dated 29-03....
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.... 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 p....
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....ee the production was much more lower, 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 ....
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.... the report of Dr. N.K. Batra, Professor of IIT, Kanpur. The Third 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, ....
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....approached the Settlement Commission and admitted the evasion and paid the excise duty and obtained immunity 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 ar....
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....er the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 units to 820 units/MT 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, ....
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....ssion, 20.7 So far as the proceedings already settled are concerned, the Commissioner is hot relying 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....
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....enue that subsequent to passing of impugned Orders the power consumption for manufacturing one 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 ....
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....ppellant companies. The copy of the majority order is placed at Page Nos. 5 and 6 of the P/B - VI. It 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 ....
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....n record in the instant case." 33. The Tribunal thereafter, noted another aspect of the issue that no independent investigation was made by the Revenue, 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....
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....nal (Income-tax) could not act as revisionary authority or make any observation whether that order was right or wrong. 36. The Tribunal further referred to search and seizure operations carried 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....
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....of the year under consideration was very well placed before the authorities below in the director's report of each year. The same has not been disputed by the Revenue. The tax audit report also contained the unit production of each year 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 ....
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....h in which electricity consumption was minimum. The method of computing the socalled suppressed production is not justified in absence of sound basis for same. 36. The consumption of the electricity for the manufacture of mild steel ingots/billets depends on various factors like quality of raw material which is the major input, voltage of the 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 as....
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.... of fluctuating electricity, therefore, was held to be one, and since details were made available to the Department, which could have been raised during the course of regular assessment and not u/s. 153A of the Act. The finding is that nothing incriminating was found in the course of search relating to these assessment years. The additions, therefore, were not corresponding to the 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 searc....
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.... electricity observed that there is nothing on record to show that high power connection supported by evidence was made on a particular date and that resulted in higher amount of production. It was further observed by the Customs, Excise & Service Tax Appellate Tribunal vide para 4.2 that So far as the production quantum is concerned, there is also no evidence on record to show that the authorities intervened lawfully 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....
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....l Excise Authorities. The Ld. CIT(A) allowed the assessee's appeal. The Revenue challenged the order of Ld. CIT(A) before the Tribunal. It was held that there was no justification to support the said addition and the Revenue's appeal was dismissed. In the light of our above discussion, we are of the opinion that the additions made by the Assessing Officer and confirmed by Ld. CIT(A) in both the assessment years based on the order passed by the CCE, Aurangabad as 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 ....
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.... 39. The Tribunal also dismissed the appeal of the Revenue against the estimation of gross profit by the CIT(A) observing as under:- "31. We have heard the parties. The main grievance of the Revenue is against the estimation of GP by Ld. CIT(A). We have already allowed the grounds taken by the assessee on the alleged suppression of the production/sales. As the assessee has succeeded on the basic additions, the grounds taken by the Revenue do not survive as the entire additions are 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 mater....
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....cation against the order of Tribunal dated 16.01.2015 and the hearing of the present appeals be kept in abeyance. After hearing the appeals in the present bunch of appeals, the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) was also fixed for hearing and the same was heard on 19.06.2015. We have by an order of even date dismissed the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) after considering the submissions of both the Authorized Representatives. We have by an order of even date held that there is no merit in the said Miscellaneous Application filed by the Revenue and no remedy is available to the Revenue under section 254(2) of the Act. In view thereof, the next objection of the Ld. Special AR for not relying on the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra) also stands dismissed. 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 ext....
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....ause of the admission of the assessee before the Assessing Officer, the sales for the period of 300 days should be extrapolated in the hands of the assessee. He stressed that 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. 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....
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....out by the Income-tax Department and the documents found during the course of search, which were admitted by the assessee to reflect suppression of sales. On the basis of aforesaid documents, 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 ....
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....on record establishing suppressed production and / or its sale outside the books of account. 49. The Ld. Special AR time and again stressed that the assessee had made admission before the Assessing 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. 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 Tribuna....
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..... (supra). 55. Further, the Bilaspur Bench of the Tribunal in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra) decided similar issue of the information available with the Central Excise Department, wherein unaccounted sales was estimated for 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 a....
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....it has offered. In other words, once a person makes a settlement petition for a particular year on account of the evidence found for part of the period and once the petition is accepted in the hands of the assessee, no further addition can be made on account of alleged clandestine removal 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 misplaced. 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 ....
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.... the Assessing Officer. Accordingly, the reliance placed upon by the Ld. Special AR in assessee's own case reported in 137 TTJ 627 [Pune] is mis-placed and there is no merit in the arguments of the Ld. Special AR in this regard." 58. Another plea raised by the Ld. Special AR was that income could be estimated/ taxed 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. 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 t....
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....ence of any evidence found against the assessee. 60. Since we have deleted the addition in the hands of assessee on both accounts i.e. addition made on account of erratic consumption of electricity and addition proposed on the basis of evidence found for the part of the year of clandestine removal of material without payment of Excise duty, next addition made in the hands of the assessee i.e. alleged investment in the purchases for effecting such sales which goods have been clandestinely removed, is not sustainable. Accordingly, we hold that no addition can be made in the hands of the assessee on account of alleged investment in purchases under section 69C of the Act. 61. One issue remaining to be adjudicated is non issue of notice under section 143(2) after issue of notice under section 148 of the Act. In view of our order in deleting the addition on account of suppressed production/sales, the said issue is dismissed as academic. 62. In view of our deleting the addition in the hands of the assessee the grounds of appeal raised by the Revenue i.e. against application of GP rate and allowance of expenses are also dismissed." 13. The Ld. Spec....
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....rounds in the appeal filed by the assessee are concerned, since the Ld. Counsel for the assessee did not press for the same these grounds are dismissed as 'not pressed'. ITA No.1636/PN/2012 (By Revenue) (A.Y. 2004-05) : ITA No.1589/PN/2012 (By Assessee) (A.Y. 2004-05) : 10. Grounds raised by the Revenue as well as the assessee are as under : Grounds by Revenue : "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. On the facts and in the circumstances of the case whether the CIT(A) was justified in not appreciating the fact that the working capital is required for purchase of raw material and day to day activities for production of goods every year. ....