TaxTMI 
TaxTMI 
2020 (3) TMI 461
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....ing grounds of appeal: I. On Reopening 1. The CIT(A) has erred both in Law and in fact in holding that your Appellant is barred from challenging the Reopening of Assessment u/s.148/147 of the Act. It is submitted that in the present proceeding before the CIT(A) your Appellant had rightly and validity taken up the ground of Reopening of Assessment and that since the Reopening has been challenged which goes to the root of Assessment, the CIT(A) ought to have dealt with the ground and decided the question of Reopening on merits, keeping in mind the facts of the case and as per the provisions of Law. II. On Quantification: A. 1. The CIT(A) has erred in confirming addition u/s.68 of the Act of Rs. 3,75,39,177/-. It is further submitted that the CIT(A) has not given a specific Show Cause Notice to make enhancement and therefore the addition made by him of Rs. 1,04,876/- is bad in Law and void and therefore entire Addition of Rs. 3,76,44,053/- (3,75,39,177 + 1,04,876) be deleted. 2. Without prejudice, it is submitted by your Appellant that Sec.68 does not apply to the facts of the case and that the amount is not Depos....
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....d by Ld.CIT(A) is required to be wholly & fully deleted. 3) Alternatively and without prejudice on CIT(A) has erred in adopting/NP @ 0.84% and confirming addition at Rs. 36,54,000/- for the year but on facts of the case he should have adopted 3 years average and it being a Loss No addition could not have been made. It is therefore submitted tghat reliefs claimed above be allowed and the order of the Ld.CIT(A) be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal. The Revenue in ITA No.1166/Ahd/2014 for AY 1995-96 has raised the following grounds of appeal: 1) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 3,07,56,000/- out of total addition of Rs. 3,44,10,000/- made on account of difference in rate of sales of PTY holding that only profit element on suppressed sales was liable to be taxed & ignore the fact that the AO had made addition on account of profit element only @ Rs. 18,500/- per ton for 1860 tons of suppressed sales which has not been disputed by Assessee. 2) On the facts and in the circumstances of ....
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....M/s SRIL on Inter unit transfer basis against the CT-3 forms in order to escape from the payment of the excise duty on the goods sold in the domestic market. But actually these goods were never reached to M/s SRIL. As such the assessee sold these finished goods fraudulently after involving other parties in the domestic market in order to avoid the central excise duty. 4.3. On the basis of such information the assessment was re-opened u/s 147 of the Act. The assessee during the assessment proceedings was requested to produce the books of accounts but it expresses its inability to do so as the books of account were seized by the Excise Department. 4.4. However, the AO during the assessment proceedings to verify the genuineness of the sales shown by the assessee in the books of accounts conducted inquiries on 10 parties to whom the assessee has shown sales. But as per the enquiry, these 10 parties did not exist. Therefore, the AO disbelieved the amount of sales shown by the assessee in the absence of books of accounts and non-existent of the parties. Accordingly, the AO treated the sum of Rs. 3,75,39,177/- being 33% of the total sales shown at Rs. 11,37,55,083/- as unexplaine....
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.... 19 December 2008 directing the assessee to appear before him along with the books of accounts, documents or any other material on which it may rely. The assessee in response to such notice vide letter dated 21st February 2009 again expressed its inability to produce the books of accounts as the same were seized by the Central Excise Department. The assessee further requested the AO to collect the necessary information/ books of accounts from the Central Excise Department. However, the AO in the absence of books of accounts again confirmed the addition of Rs. 7,46,23,277/- (Rs. 3,75,39,177/- under section 68 of the Act and Rs. 3,44,10,000/- suppression of sales) to the total income of the assessee. Aggrieved assessee preferred an appeal to the learned CIT (A). 5. The assessee before the learned CIT(A) submitted that it has written various letters to the central excise department requesting for the releasing of the books of accounts but its request remained unattended. Similarly, the assessee also requested the AO to collect the books of accounts directly from the excise department in order to verify the genuineness of the sales but the AO failed to do so despite there was ....
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....xpanded by introducing one more machine in the month of March 1995 with the capacity of 1100 to 1700 tonnes. Therefore, there was no possibility of even manufacturing its PTY products of 1860 tonnes during the year. 5.7. Further, the AO started the proceeding at fag end of the assessment and passed the order in hurry/haste without the application of mind. The assessee further claimed the addition u/s 68 on account of unexplained cash credit was made arbitrarily. There was no clarity about the parties from the AO order in whose respect the addition is made. 5.8. The ld CIT(A) after going through submission and order of the Hon'ble ITAT and the order of the AO observed that it is the set-aside proceedings and the issue is confined to the direction of the ITAT. Accordingly, the learned CIT (A) made certain observations as detailed under: i. Regarding the addition of Rs. 3,75,39,171/- under section 68 of the Act a. The books of accounts of the assessee pertaining to the year under consideration were not seized by the central excise department. But the assessee on the pretext of getting the books of accounts seized by the central excise department did....
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....(878 x 51823). (c) The appellant in the same Annual report reflect that net sale consideration i.e. excluding Central Excise is of Rs. 11.26 cro9res for 860 tonnes sale. This gives av.sale price excluding Central Excise at Rs. 1.31 lac per ton (11.26 crore/860). (d) On the basis of production shown by appellant at 878 tonnes, the total Central Excise of Rs. 6.27 cr. Was paid. But, as per Rs. 51,823/- per ton rate, such Central Excise duty comes to Rs. 4.55 cr. (878 x 51823). Therefore the appellant though recorded central excise payment in excess of Rs. 1.72 cr (6.27 - 4.55) but the corresponding production and sale is not shown by appellant. On the basis of Rs. 51,823/- per ton duty such excess production/sale worked out at 331.89 tones of PTY (1.72 cr./51823). (e) At the average rate of average sale price of Rs. 1.31 lac/ton this excess production / sale of 332 tonnes come to Rs. 4.35 crore (332 x 1.32). It is therefore the suppression of sale comes to Rs. 4.35 crore on the basis of estimation from the appellant's own records. It is important here to note that during previous year 93-94 relevant to A.Y. 94-95 the appellant on the total....
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....sh credit in the books of the assessee which were not explained and therefore he invoked the provisions of section 68 of the Act by making the addition of Rs. 3,75,39,177/- to the total income of the assessee. The view taken by the AO was also adopted by the learned CIT(A). 9.1. Similarly, the AO also found that there was the suppression of sale to the tune of Rs. 3,44,10,000/- and accordingly he made the addition to the total income of the assessee. However, the learned CIT (A) deleted the addition made by the AO in part by observing that the element of profit embedded in the suppressed sale can only be brought to tax i.e. Rs. 36,54,000.00 only. Accordingly the learned CIT (A) deleted the addition for Rs. 3,07,56,000/-. Now the first issue before us arises whether the amount received by the assessee for Rs. 3,76,44,053/- during the year represents the unexplained cash credit under section 68 of the Act. The assessee has claimed to have made sales to 6 parties amounting to Rs. 4,11,36,522/- which are reproduced as under: (i) M.K. Textiles Rs. 29,04,991/- (ii) Hardik Textiles Rs. 1,98,91,748/- (iii) Lata Textiles Rs. 19,96,635/- (iv) Shaka Fabr....
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....ned cash credit over and above the sale proceeds. We also find important to refer the provisions of section 68 of the Act which reads as under: "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: ....
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....ted in 258 ITR 654 wherein it was held as under: "The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income, answers by itself in the negative." 10.1. There was no allegation by the authorities below that the assessee has made some investment in the sales which has been suppressed. Therefore, the learned CIT (A), in our understanding, has correctly estimated the profit. Accordingly, we do not find any reason to interfere in the finding of the learned CIT-A. 10.2. We also note that the entire basis of the additions as discussed above was on the basis of the information rec....
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....section (1) of section3 of the Additional Duties of Excise (Goods of Special Importance) Act 1957, subject to the following conditions, namely:- ....... 5. Notwithstanding anything contained in this notification, the exemption contained herein shall also apply to the said goods used for the purposes of production, manufacture, processing or packaging of articles in a user industry and such articles (including rejects, waste, scrap and remnants arising out of such production, manufacture, processing or packaging of articles) even if not exported out of India, are allowed to be cleared outside the user industry under and in accordance with the Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the said Board or the said Committee, as the case may be, on payment of appropriate duty of excise ... " (emphasis supplied) 9.2. Notification 13/81- Cus dt 9-2-81 states that: "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act 1962, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in th....
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....ointed by the notification of Government of India in the Ministry of Industry, Department of Industrial Policy and Promotion or the Development Commissioner concerned as the case may be, for this purpose, (hereinafter referred to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to (he following conditions, namely: -... ... ... ... (7) Notwithstanding anything contained in this notification the exemption herewith shall also apply to goods which on importation into India are used for the purpose of manufacture of articles within hundred per cent Export Oriented Unit and such articles (including rejects, waste & scrap material arising in the course of manufacture of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export & Import Policy, on payment of duty of excise leviable thereon under section 3 of the Central Excise Act 1944....." (emphasis supplied) 10. On going through the provisions of the aforesaid exempti....
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.... in the local market viz., Domestic Tariff Area (DTA). Hence irrespective of whether the final products were 'allowed to be sold in India" or not, the indisputable fact was that the same were sold in India. In view of the above fact, the demand of duties on the final products were confirmed as per Sec 3 of the Central Excise Act 1944 as indicated in para 10 above. 10.3. In view of the discussion in paras 10 & 10.1 above, I conclude that SSTIL & BTL are eligible for the benefit of exemption notifications 1/95 - CE dt 4-1-95 in respect of RM procured indigenously & 13/81 - Cus dt 9-2-81 as amended by 55/97 - Cus dt 3-6-97 in respect of RM procured by way of imports." 11. The learned DR at the time of hearing has not brought anything contrary to the finding of the central excise department as reproduced above. Thus in the absence of any assistance from the learned DR we have no alternate except to place the reliance in the aforesaid order as true and correct. Furthermore, we also assume that the impugned order of the central excise department pertains to the year under consideration. In the result the appeal filed by the assessee is allowed and the appeal filed by t....