TaxTMI 
TaxTMI 
2015 (8) TMI 1305
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.... 30.3.2010. In response to the said notice, the assessee filed return of income on 29.7.2010 declaring the same income of Rs. 11,42,98,930/- as was declared in the original return. 3. The Assessing Officer during the course of assessment proceedings, issued show cause notice to the assessee alleging that it had availed fraudulent CENVAT credit for the period 21.3.2003 on 24.8.2005 on invoices issued by M/s Haryana Steel & Alloys Ltd. without receiving the consignments. As per the information, it was seen that the assessee had filed an application before the Settlement Commission, Customs & Central Excise (Principal Bench), New Delhi against the said show cause notice by the Addl. Director General of Central Excise Intelligence. The final order of the Settlement Commission was passed imposing penalty of Rs. 4,11,84,835/-. As per the list of invoices pertaining to bogus purchases made by the assessee from M/s Haryan Steel & Alloys Ltd., attached with the show cause notice, the total purchases made during the relevant assessment year worked out to Rs. 92,25,641/-. 4. In response to the said show cause notice, the assessee made detailed reply stating that the ....
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....hat the such bogus transactions being embedded in the trading/manufacturing account of M/s Shanti Steel New Rolling Mill-II Unit of the assessee, the correctness of the books of account of the assessee was distorted on these basis. He rejected the books of account of the said unit. Further, since the GP rate of the assessee had come down to 7.6% during the relevant assessment year as against 8.4% in the preceding assessment year, he applied the rate of G.P. shown in the preceding assessment year on the total turnover of Rs. 71,53,41,741/- and made an addition of Rs. 57,22,734/-. However, he did not made separate addition of Rs. 12,23,560/- on account of wrong availment of CENVAT credit as the same was considered to be in overall addition of Rs. 57,22,734/- 7. The assessee went into appeal before the learned CIT (Appeals) challenging the rejection of books of accounts, estimation of GP rate of 8.4% as well as the addition on account of CENVAT credit. Before the learned CIT (Appeals), it was again reiterated that the purchases of Non Alloy Steel Billet for its unit Shanti Steel New Rolling Mill-II was made from various non-duty paid sources like open market t....
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....y from the open market was purchased by the assessee. Relying on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. La Medica, 168 CTR 314, the learned CIT (Appeals) held that the payments to M/s Haryana Steel & Alloys Pvt. Ltd. were emanated from bogus purchases and fraudulent claim of CENVAT. In other words, unexplained expenditure expended towards the bogus purchases to the tune of Rs. 92,25,641/-. In this way, the learned CIT (Appeals) made an addition of Rs. 1,04,49,201/- comprising of Rs. 92,25,641/- being the total purchases from M/s Haryana Steel & Alloys Pvt. Ltd. and the amount of Rs,.12,23,560/- being the CENVAT credit availed by the assessee on the said purchases. 11. The learned counsel for the assessee while arguing before us preferred not to press Ground No.3, challenging the validity of reopening u/s 147 of the IT Act. Hence, ground No.3 is dismissed as not pressed. 12. Ground Nos.1 & 2 are interrelated. 13. While arguing before us, the learned counsel for the assessee took us to the various pages of the paper book filed by the assessee. Our attention was drawn to paper book pages 27 to 36 which are the copies of documents seized by the....
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....urchases made from the open market in the month of January and February, 2003, the yield comes to 101.87 % and 98.15%, which is unreasonably high and not possible in this line of manufacturing. It was shown to us to emphasize that the purchases were actually made though not from Haryana Steel & Alloys Pvt. Ltd. but from the other sources. 16. Regarding the estimation of G.P made by the AO, rejecting the books of account it was submitted that Gross Profit in the relevant year has fallen to 7.6 per cent as against 8.4 per cent in the preceding year, which is only a nominal fall. The assessee submitted before the Assessing officer as well as the CIT(A) that the reason of said fall in Gross Profit was on account of increase in power of fuel expenses as compared to the preceding years. In terms of percentage expenses of power and fuel during he assessment year 20022003 it was 5.36% whereas during the relevant assessment year it has come to 6.28 %. Merely because of fall in Gross Profit rate during the year under appeal compared with the Gross Profit of the last year, the contention of the assessee was that the books should not have been rejected and profit should not have been estimate....
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....ct that assessee receive excise duty element on sales from customers but paid the Government from that amount which remains payable after reducing the CENVAT credit available because of the fact that it made purchases from Haryana & Steel Alloys Pvt. Ltd. The whole excises carried on by the assessee was to get the benefit of these CENVAT Credit. Therefore, the only addition warranted in such case is to disallow the CENVAT Credit availed by the assessee on the purchases shown to have been made from Haryana & Steel Alloys Pvt. Ltd. The assessee has preferred not to pressed the ground related to these CANVAT Credit before the CIT(A), the same is also not contended before us. The fall in GP rate was due to increase in power and fuel expenses in year under appeal as compared to preceding year. The learned CIT (Appeals) enhanced the addition because the Assessing Officer did not state in assessment order that similar quantity was purchased from open market. This finding is incorrect because the Assessing Officer so stated in the assessment order and same fact is supported by seized material in search (PB-27 to 36). 19. Our view gets strengthened by the judgement of the Jurisdictio....
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....rofit element embedded therein would be subject to tax. This was the view of this Court in the case of Sanjay Oilcake Industries v. CIT, 316 ITR 274(Guj.) Such decision is also followed by this Court in a judgement dated 16.8.2011 in Tax Appeal No. 679 of 2010 in the case of CIT v. KishorAmrutlal Patel." In the result, tax appeal is dismissed." 20. Another point to be appreciated is that in subsequent years i.e., 2004-05 to 2006-07, the assessee was before the Income Tax settlement commission, whereby the same plea was taken by it. During the said proceedings on the perusal of report of the CIT(Central) Gurgaon, as submitted to the settlement commission, which we have already quoted, it can be seen that Department has not proposed any addition on account of these purchases. Only the amount of CENVAT Credit so availed by the assessee was offered for taxation in its application by the assessee before the Income Tax Settlement Commission and the department has accepted the same. No addition on account of said bogus purchases has been made. 21. In view of the above discussion, it is quite evident that the assessee had made purchases from the open market and shown the same to be made....