TaxTMI 
TaxTMI 
2018 (1) TMI 1153
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....leted." 2. The revenue's appeals and assessee's C.O. are being heard together and for the sake of convenience and brevity, a common order is being passed. 3. Briefly stated facts of the case are that a survey operation was carried out by the department of Central Excise at the factory premises of the assessee on 23/12/2009. The Excise authorities found that TMT bars valuing of Rs. 52,35,630/- was not recorded in the books of account. The case of the assessee was reopened and assessment U/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) was framed vide order dated 25/3/2013 thereby the Assessing Officer made addition of Rs. 52,35,630/- and added back in the income of the assessee. 4. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who after considering the submissions, partly allowed the appeal. While partly allowing the appeal, the ld. CIT(A) sustained the addition of 20,11,527/- against the addition of Rs. 52,35,360/- made by the Assessing Officer. 5. Now the revenue is in appeal and the assessee is in Cross objection before the ITAT. 6. Firstly we take assessee's cross objection in C.O. ....
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....sh clandestine removal and clearance by the appellant on this count' and he declined to uphold the order to lower authorities on this issue (APB 149). The assessee company has further filed appeal with CESTAT, New Delhi and the same is pending for adjudication. During the course of assessment proceedings u/s 147 / 143(3) of the Income Tax Act, 1961 the actual facts alongwith documentary evidences were brought to the knowledge of the Td. AO vide letter dt. 3.3.2015 (APB 31- 40) without appreciating the same had made the addition of Rs. 52,35,630/- by invoking the provision of section 145(3) alleging the same as excess stock. While making the addition Id. AO had also failed to appreciate the fact that stock of raw material of almost similar quantity was found short during the course of survey and simply proceeded on the information received from Central Excise Department and view taken by the Additional Commissioner of the Central Excise Commissionerate-I (ACCEC-I) that the assessee was involved in clandestine removal of goods from the factory without payment of excise duty. The Id. AO further did not at all appreciate the fact that allegation of the ACCEC-I, with respect to cland....
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.... them in the factory premises of the assessee company and as such these facts alone are sufficient to establish that allegation of shortage and excess of the stock as per Panchnama dated 23.12.2009 are not based upon any actual finding. Thus, if the facts mentioned in the Panchnama itself were not true, the same cannot be made true by obtaining the statement of Director or authorized signatory of the assessee company. In view of above position that proper and actual weighment of goods was not done by the Central Excise staff and weight of various pieces / bundles of ingots and MS Bars was recorded merely on estimation and more particularly scrap was not at all weighed (though its weight so to be taken on mere estimated basis is highly subjected to variation) and therefore shortage of raw material so shown by excise authority is not at all reliable. Similar is the position of finished goods. In this regard it is to reiterate that immediate protest was made within 24 hours by the assessee company vide letters dated 24/12/2009 to the concerned authorities with regard to illegal/uncorroborated finding of shortage / excess of input / finished goods on 23.12.2009. In view of these fac....
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....s for the year under consideration and due income tax has been paid by the company on the same. Thus it is submitted that when the sales of 202.995 MT of MS Bars had already been included in the total sales in books and profit on such sale was also reflected and due tax on such profit has already been paid and moreover corresponding raw material used for this production (leading to the alleged shortage of raw material at the time of survey) has also been reduced in the books of accounts, there is no justification to sustain even part of the addition, as done by Ld. CIT(A) as it is leading to taxing the same receipt / income twice. Without prejudice to above, it is also submitted that the Ld. CIT(A) has appreciated the fact that the shortage of raw material and simultaneous excess of finished goods at the time of survey would obviously be due to the fact that part of the raw material has been converted into finished goods and was about to be recorded, however in the meantime survey action of excise department took place. Now coming to the marginal difference between the alleged shortage of raw material and alleged excess of finished goods, it is submitted that upto the date of ac....
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....books of accounts. Moreover, the ld. AO has not pointed out specific defects in the books of accounts except the difference in the stock of raw material and finished goods at the time of survey of DGCEI, which has also been duly corrected by the appellant by passing the entry in the finished goods and raw material account. The Ld. CIT(A) has erred in upholding the rejection of books of accounts. The Ld. CIT(A) while upholding the invoking of provisions of sec 145(3) which was only on basis of information supplied by the Central Excise Department, estimated the GP @3.20% as against 3.03% declared by the assessee. The GP declared by the assessee for the preceding three years is as under: AY Turnover GP NP 2007-08 109 cr. 3.17% 0.96% 2008-09 135 cr. 3.06% 1.01% 2009-10 121 cr. 3.03% 1.14% The GP estimated by the Ld. CIT(A) is without any basis nor based on any comparative case. It is an established position backed with jurisdictional pronouncements, that if the provisions of sec 145(3) are invoked the best guide to estimate the GP / NP is the past performance of the assessee. The above table reveals that though there is a marginal fall in the GP rate by only....
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....ound on the date of survey. (xi) During the appellate proceedings, the appellant has filed a chart showing details of MS Ingots consumption, production of MS Bars, scrap, burning loss and Mis Roll, which was also filed before the AO during assessment proceedings for the period 01.04.2009 to 22/12/2009. It is noted from the said chart that on consumption of 31781.160 MT of MS Ingots, there was burning loss of 1015.810 MT i.e. the burning loss account for 3.20% of the consumption of raw material. It may be mentioned here that no benefit can be given to the appellant on account of Mis Roll and scrap generated during the process of manufacturing of MS Bars as claimed by the appellant in its submissions as these are recycled for production of MS Ingots as the financial statements of the appellant show only very small amount on sale of scrap. If this burning loss of 3.20% is applied to 250.04 MT of raw material found short at the time of survey and contention of the appellant is accepted that the raw material is converted into finished goods, then the consumption of 250.04 MT of raw material should produce 242.04 MT of MS Bars whereas the excess stock of MS Bars found by the officers ....
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....dition of Rs. 20,11,527/-. It is clarified that this addition of Rs. 20,11,527/- includes sale amounting to Rs. 10,74,819/- which was held to be out of the books of accounts of the appellant." The basis of making addition by the Assessing Officer was that during the survey operation, the Central Excise Department found there was excess of raw material. It is the contention of the assessee that the ld. CIT(A) has not taken into consideration the fact that some scrap was generated during the manufacturing process, which gave difference between the raw material and finished goods. Further the ld. Counsel for the assessee has contended that the first appellate authority under the Central Excise Act i.e. Commissioner of Appeal-1, Central Excise vide order dated 02/1/2013 has given a finding that there was no sufficient material on record to establish clandestine removal on clearance by the appellant. It is stated by the assessee that on the date of survey, actual production of MS Bars was 29668.220 MT whereas consumption of MS Ingots was 31781.160 MT resulting into burning loss of 1015.810 MT, scrap generation of 1018.865 MT and mis roll of 78.265 MT. We find that this fact is not con....