TaxTMI 
TaxTMI 
2021 (10) TMI 1245
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 15,94,08,394/- made by the AO as the various case laws cited by the Ld. CIT(A) which do not apply to this case as even after conclusion of search, during assessment proceedings, the assessee had offered no satisfactory explanation on reconciliation of the discrepancies found and on analysis of books of account and other documents furnished?" 3. "Whether on the facts of the cases and in law, the CIT(A) is justified in deleting the addition of Rs. 15,94,08,394/- made on the basis of estimation of income based on average yield across the business @ 89%?" 4. "Whether on the facts of the cases and in law, the CIT(A) is justified in deleting the disallowances of Rs. 1,09,83,112/- made u/s. 14A r.w. Rule 8D, thereby ignoring the fact that the assessee has made investment in shares out of loan borrowings, as it has no other free fund available in its Balance Sheet more so when the Assessee had claimed a huge amount of interest expenses thereby reducing its net profit?" 5. "Whether on the facts of the cases and in law, the CIT(A) is justified in deleting the disallowances of Rs. 1,09,83,112/- made u/s. 14A r.w. Rule 8D, ignoring the CBDT's Circular no. 14/2006 dated 28.12.2006?"....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e made on account of alleged suppression of yield. The AO has simply continued with the additions towards lower yield as shown in the search assessment on the ground that the deletion of addition in first appellate order in those years have not been agreed by the department and an appeal has been preferred against the first appellate order before the ITAT which is pending for adjudication. 5. Aggrieved by the additions made towards lower yield, the assessee preferred appeal before the CIT(A). The CIT(A), after taking note of attendant facts and circumstances, deleted the additions so made for which the concluding operative para is reproduced for ready reference: "10. I have considered the grounds of appeal, gone through the order of the AO and seen the submission of the appellant. I observe that the AO has rejected the books of accounts u/s. 145 of the Act and for doing so the AO has mentioned that the GP rate of the appellant has gone down drastically as compared to the preceding years and the appellant had not satisfactorily explained the reasons for decline in GP and NP rates. The AO further stated that the yield declared by the appellant in steel melting shop i.e. SMS divisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the AO, therefore, same cannot be said to have any evidentiary value. The assessments in the case of the appellant in all the preceding A.Ys have been completed adopting yield rate of 89% in the SMS division. 10.2 Vide this office letter dated 7.12.2017 in F. No. CIT(A)-11/RPR/Appeal Proceed 2017-18 dated 07.12.2017 in the case of the appellant for A.Y 2013-14 the AO was asked to explain the basis for adopting yield at 89% vide letter dated 21.12.2017 the AO has enclosed the assessment order of the appellant for the AY 2006-07 to 2012-13 and relied upon the findings and conclusion of the predecessor AO in the search assessment proceedings completed in the case of the appellant. I observe that the addition made in the search assessment by adopting 89% yield in the SMS division stands deleted by my ld. predecessor in his order which have been followed in the order passed by me for AY 2013-14 on the same facts and circumstances. As regards decline in GP rate the appellant contended that the Iron and Steel sector had been going through a challenging face owing to sluggish domestic demand and constraints of iron ore supply along with steep rise iron ore prices. It was brought to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment as a benchmark for the subsequent years even if the assessee is carrying on the same business. The facts and circumstances of each year are to be considered separately and must find reference in the assessments completed on the basis of cogent material. In the case of Ramesh Steel industries in ITA No: 48 of 2015 the Hon'ble Chhattisgarh High court held that the graph of business was not always in a straight line and fluctuates from year to year. Under section 145(3) of the act the jurisdiction of the Assessing Officer arises if he was not satisfied with the accounts of the assessee. 10.5 I further observed that the books of accounts of the appellant was subject to tax audit and since the appellant is dealing in excisable product it has filed excise returns on monthly basis as well as the VAT returns as per sales tax laws. These evidences were produced before the AO who examined the same including the bills and vouchers. With a view to bringing on record basis behind adoption of yield at 89% in the appellant proceedings of A.Y. 2013-14 the AO was asked to convey the basis for doing so. From the remand report of the AO it was found that the reliance was placed on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidences placed on record. The AO has made mechanical addition of the difference between the unaccounted production/sales worked out on the basis of 89% yield suspected by the AO that must have been achieved by the appellant. The AO has not brought any material on record to disbelieve the book result shown by the appellant. If there is no suppression of material facts, the authority cannot embark upon a speculative assessment of notional profits. The assessment should be based on cogent facts and there should be no vindictiveness or arbitrariness in passing the assessment order. The estimated additions made by the AO do not bear any relationship with the specific defects in books of accounts and the AO cannot be permitted to make arbitrary addition. The core thing to be seen is the evidence found which will be the basis for making the assessment. Coming to the facts of the case, the AO estimated unaccounted production and sales based on benchmark yield of 89% in case of SMS division. The entire estimated suppressed sale has been treated as profit. I am convinced that the determination of undisclosed income in this case is merely on the basis of presumption and on an estimate basis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated comparable instances of GP and NP of industry averages wherein the GP and NP of the appellant is much higher than the others. The case laws relied upon in the appellate order of my predecessor some of which are reproduced as under are relevant to the facts in question. (a) ACIT Vs M/s. Balajee Structurals (1) Pvt. Ltd. (supra), the jurisdictional Bench Hon'ble ITAT; (b) ACIT vs. M/s. Super Iron & Steel Pvt. Ltd., ITA No. 139 to 141/BLPR/2010; (c) Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288; (d) Income Tax Officer vs. W.D. Estate P. Ltd. (1993) 46 TTJ (Bom) 143 : 45 ITD 473; (e) Commissioner of Income Tax Vs. Discovery Estates Pvt. Ltd. (2013) 356 ITR 159 (Delhi); (f) Mangilal Rameshwarlal Soni (HUF) vs. Assistant Commissioner of income Tax (2004) 83 TTJ (Jd) 770 : (2004) 4 SOT 680 (Jd); (g) Bansal Strips (P) Ltd. & Ors. vs. Assistant Commissioner of Income Tax (2006) 100 TTJ(Del)665 : (2006) 99 ITD 177(Del) by the Hon'ble ITAT, DELHI "A" BENCH; (h) Dhakeshwari Cotton Mills Ltd. Vs Commissioner of Income Tax (1954) 26 ITR 775 (SC); 10.8 The appellant also relied upon the decision of the jurisdictional of High court of Chhattisgarh in M/s. Rame....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounsel submitted that the issue being only a continuation of the old controversy without any factual deviation, the conclusion already arrived at by the co-ordinate bench on the subject in issue requires to be followed. 9. We have carefully considered the rival submissions. We straightway find that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench for A.Ys. 2009-10 to 2012-13 in ITA Nos. 232 to 235/RPR/2014 order dated 07.11.2019. The co-ordinate bench of the Tribunal dismissed the appeal of the Revenue against the order of CIT(A) in identical factual and legal matrix. The Revenue has failed to show the departure in substantial facts. The whole basis for addition on account of alleged suppression of production in SMS/Furnace division is merely relying upon the conclusion drawn by the predecessor AO in the search assessment of the assessee, which was found to be unsustainable both by the CIT(A) as well as the ITAT in earlier years. We simultaneously note of the fact that the yield percentage of 97% referred by the AO in the assessment year with which comparison has been made does not relate to SMS division as the billets have been ment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in SMS Division. 9. In the case of M/s. Ramesh Steel Industries Vs. DCIT-1(1), Raipur, ITA No. 48 of 2015, the Hon'ble Chhattisgarh High Court has held and observed that "the power of the Assessing Officer under Section 145(3) is not absolute but was regulated and circumscribed by statutory provisions." That further "power consumption in an industry may vary for various reasons. Under Section 145(3) of the Income Tax Act, the jurisdiction of the Assessing Officer arises if he was not satisfied about the correctness of the accounts of the assessee. However, the Assessing Officer should give specific reasons for rejecting books of accounts." 10. In the instant case, the Assessing Officer calculated yield of 89% and has also calculated consumption of power and difference thereto pertaining to production and has held that the books of accounts are therefore not reliable and rejected the books of account while resorting to Section 145(3) of the Act. As per the legal principles laid down by the Hon'ble Chhattisgarh High Court (supra.) that this power is not unfettered and it has to be used judicially by giving specific reasons which in the instant case, the Assessing Officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cer has not brought on record any evidence stating lower or suppression of sales by the assessee. He tried to support his case by showing deficiency in power consumption by the assessee. But the Hon'ble High Courts have held without any direct corroborative evidences on low yield or suppressed sales, the disparity of power consumption cannot be the sole ground or reason for making addition by the Assessing Officer. 14. In view of the aforesaid examination of facts and judicial pronouncements, we find the order of the Ld. CIT(A) is absolutely correct and therefore, the same does not call for any interference. Thus, ground relating to "issue of the lower yield declared by the assessee" in all the appeals for all the assessment years are therefore dismissed." In the light of the view taken by the co-ordinate bench in the case of assessee in earlier assessment years, the issue is no longer res integra. It is evident that issue is squarely covered by the decision of the co-ordinate bench in assessee's own case for AYs. 2009-10 to 2012-13 wherein also the appeal of the Revenue was dismissed after elaborate discussion on factual and legal matrix. The Revenue could not bring any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 771 . 77 536 . 61 564 . 80 584 . 63 C) Share Application Money 0 . 00 230 . 00 1645 . 00 0 . 00 0 . 00 0 . 00 Total Non Interest bearing Funds 5000 . 87 10303 . 33 14521 . 07 14664 . 29 13755 . 38 12477 . 25 Table Showing Proportion of Investment to Cash Profit earned by the assessee during the F. Y in which investments were made F. Y Investment ( Rs. in Lacs) Net- worth ( Rs. in Lacs) Investment to Net- worth Ratio (%) Total Non- interest bearing funds ( Rs. i n Lacs) Investment t o Non- interest bearing funds Ratio (%) 2005 - 06 30 . 01 2915 . 31 1 . 03 5000 . 87 0 . 60 2008 - 09 200 . 00 7949 . 91 2 . 52 10303 . 33 1 . 94 2010 - 11 10 . 00 11749 . 30 0 . 09 14521 . 07 0 . 07 2012 - 13 282 . 00 12711 . 18 2 . 21 14664 . 29 1 . 92 2014 - 15 999 . 92 13090 . 58 7 . 64 13755 . 38 7 . 27 2015 - 16 1441 . 41 11892 . 62 12 . 12 12477 . 25 11 . 55 On going through the above submissions and details of Total Non-interest bearing funds available with ....