TaxTMI 
TaxTMI 
2018 (8) TMI 1847
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..... 3. These matters are having chequered history spanning nearly 10 years. The assessee is engaged in the business of manufacturing of Ceramic tiles of various sizes and measurements. The assessee is a part of 'Vrundavan group of companies' had filed the return of income for the AY 2004-05 and the assessment of such return was completed at the relevant time. Later on, the Director General of Central Intelligence (DGCEI in short) conducted a search in the assessee's premises on 17.01.2008, several incriminating documents were recovered in the said search proceeding. The investigation led to a prima-facie revelation that the assessee was engaged in large scale of financial irregularities which was unearthed by the DGCEI. There was a suppression of sale of Rs. 590 crores (round off) by the assessee, as was the finding of the said authority. The show-cause notice was issued by the Excise Department on the basis of such materials collected by the DGCEI, which along with relevant materials were forwarded to the Income Tax Department by the Excise Department. The Assessing Officer (AO) on the basis of such materials reopened the assessment of the assessee for the Assessment Year 2004-05....
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....late authority. The Learned Tribunal was pleased to quash the reassessment orders for all the years by and under an order dated 27.02.2015 with the following observations : "18. We find that the AO, in the above recorded reasons, has concluded that the show cause notice issued by the Excise Department is foolproof and substantial material evidence of suppression of sales. 19. in our considered view, the above conclusion of the AO is contrary to the decision of the Hon'ble jurisdictional High Court in the case of Futura Ceramics Pvt. Ltd. vs. State of Gujarat, SCA No.6500 of 2012 order dated 20.12.2012, wherein the Hon'ble High Court while deciding the issue under VAT Act on a similar show cause notice issued by the Central Excise Authority has held as under :- "....... Merely because the Excise Department issued a show cause notice, that cannot be a ground to presume and conclude that there was evasion of excise duty implying thereby that there was also evasion of tax under the VAT Act. It is not even the case of the Department that such show cause notice proceedings has culminated into any final order against the petitioner. We wonder what would ha....
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....%, 10.68% and 7.38%, 3.65% in case of Vrundavan Ceramics Pvt. Ltd., Gokul Ceramics Pvt. Ltd.. Ramco Ceramics Pvt. Ltd. and Ferro Glazed Tiles Pvt. Ltd. respectively. As discussed and stated above that the above net profit rate of assessees includes some portion of profit of suppressed turnover. Therefore, to give effect of that and on account of fair and reasonable estimation, we are of the view that the average net profit rate of all 4 units will be a good basis for fair and reasonable estimation of profit on suppressed turnover. It is settled position that in estimation, some guess work cannot be ruled out. The average net profit rate of all 4 units comes to 8.72%. In that rate, if we include 0.28% to cover miscellaneous benefit of the turnover out of the books of account, that will be a fair and reasonable rate of profit which comes to 9%. This rate of 9% net profit will be fair and reasonable on this count also that the assessee will not get major benefit of profit of evasion of excise duty as Excise Department has already taken action in this regard. On application of 9% rate of profit, the relevant calculations are as under:- Particulars Vrundavan Gokul ....
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....tatements of the petitioner and other relevant witnesses and had come to an independent opinion that there was in fact evasion of excise duty by clandestine removal of goods, he would have been justified in making additions for the purpose of VAT Act. In the present case, however, no such exercise was undertaken. All that the assessing officer did was to rely on the show-cause notice issued by the Excise Department. Nowhere did he conclude that there was a case of clandestine removal of goods without payment of tax under the VAT Act. Merely because the Excise Department issued a show-cause notice, that cannot be a ground to presume and conclude that there was evasion of excise duty implying thereby that there was also evasion of tax under the VAT Act. It is not even the case of the Department that such show-cause notice proceedings has culminated into any final order against the petitioner. We wonder what would happen to the order of reassessment, if ultimately the Excise Department were to drop the proceedings without levying any duty or penalty from the petitioner. All in all, the Assistant Commissioner has acted in a mechanical manner and passed final order of assessmen....
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....uance of show cause notice for recovery of unpaid Excise Department and penalty in given cases. Without prejudice to the finding of Custom, Excise Department, question before us is whether on mere show cause notice issued by Excise Department can be made basis of addition for the purpose of Income Tax Act. Income Tax Officer has utilized the material collected by Excise Department including statement of petitioner and other relevant persons as discussed above and on the basis of same. He would have been justified in making addition for the purpose of Income Tax Department in present case by independent enquiries by concern Income Tax Authorities. No such exercise was undertaken by Income Tax Department at all. Assessing Officer has simply relied on show cause notice issued by Excise Department. Nowhere did he conclude that there was a large scale removal of goods without payment of tax under Income Tax Act. Merely because Excise Department issued show cause notice, that alone cannot be a ground to assume and conclude that there was evasion of Income Tax Act as well. It is not even the case of Department that such show cause notice proceeding has culminated into any final order agai....
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.... - Varmora Grantio P. Ltd. - AY 2008-09 - Italica Tiles P. Ltd. - AY 2008-09 10. As a result whereof the 4 following cases were kept pending adjudication before the Learned Income Tax Appellate Tribunal in terms of the order passed by the Hon'ble High Court at Gujarat. - Gokul Ceramics Pvt. Ltd. - AY 2008-09 2 Tax Appeal Nos.80 & 81/2016 consequent to ITA No146 & 109/Rjt/2013 - Ganga Glazed Tiles - AY 2008-09 1 Tax Appeal No.93/2016 consequent to ITA No.132/Rjt/2013 - Ganga Glazed Tiles Pvt. Ltd. - AY 2008-09 1 Tax Appeal No.96/2016 consequent to ITA No.100/Rjt/2013. 11. Precisely the following 44 matters were pending before the Learned Income Tax Appellate Tribunal for adjudication: - Ganga Glazed Tiles - AY 04-05 to 07-08 8 (A+D) - Gangotri Glazed Tiles - AY 04-05 to 07-08 8 (A+D) - Gokul Cera Pvt. Ltd. - AY 04-05 to 06-07 6 (A+D) - Vrundavan Cera P. Ltd. - AY 04-05 to 06-07 6 (A+D) - Varmora Grantio P. Ltd. - AY 05-06 to 07-08 6 (A+D) - Italica Tiles P. Ltd. - AY 05-06 to 07-08 6 (A+D) - Gokul Cera. Pvt. ....
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....ly cosmetically gave an opportunity to the assessee to meet with such allegations, virtually, shifting the burden of proving the evasion of duty that had taken place on the assessee. We have perused the entire order of assessment. There is no independent material brought on record by the Assessing Officer other than those which were already collected by the Excise department and which, as noted earlier, are yet to be verified. 12. Counsel for the assessees drew our attention to a judgement of Customs, Excise and Service Tax Appellate Tribunal in which, the order of adjudication passed in case of one of the ceramic units (not an assessee before us) by the Adjudicating authority came to be set aside. However, for the following reasons we do not wish to place any reliance on this judgement: Firstly, the excise show-cause notices in case of the present assessees are yet to be adjudicated. What would be the material on record during such proceedings is not possible for us to foresee. Secondly, the Tribunal has mainly proceeded on the basis of absence of section 4A of the Central Excise Act at the relevant time which, in the opinion of the Tribunal, alone could....