TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 374
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....ee is engaged in the manufacturing of re-rolled products such as heavy steel structural, joist and girder. Search and seizure on the premises of the assessee was conducted on 21-6-2011, assessment was completed on 27-3-2014 and order was passed under Section 153A read with Section 143(3) of the IT Act for the assessment year 2011-12. The Assessing Officer has made an addition on account of unaccounted sales based on an estimated production yield of 89% in the assessee's SMS Division. The Assessing Officer adopted an estimated yield ratio and proceeded to calculate alleged unaccounted production and consequential sales, resulting in substantial additions over multiple years. The Assessing Officer has made addition of Rs. 12,81,75,540/- by recording following finding:- "9.7 Thus based on the evidences found during the search and seizure action, following conclusions can be drawn: - (i) that in the SMS Division, there is wide variation in the consumption of electricity vis-a-vis production of finished goods in different months of a year. (ii) that in the SMS Division, there is wide variation in the consumption of Sponge Iron vis-a-vis production of finished goods ....
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.... in its order (para 27.2) as under: - "(i) The AO has failed to establish the nexus between the mathematical calculations of highest and lowest consumption of power, sponge iron (raw material) etc. with yield of 89% adopted by the AO. (ii) The basis for arriving at the standard yield of 89% has not been disclosed despite repeated requests on behalf of the assessee. The CIT(A) himself attempted to work out the average yield in the industry based on data available from the department but failed to arrive at this so called standard figure of 89%. (iii) Comparison of yield declared by the other assessee engaged in the similar line of business was carried out as tabulated in para 9.4 of the first appellate order. On the basis of such comparison, arithmetical mean of yield stands at 81.35% in respect of other parties vis-a-vis 83.94% shown by the assessee. It was also found by the CIT(A) that yield declared by the different parties in the same year is not uniform and every party has declared a different yield. Likewise, there is a wide variation in the yield of one year with another year in other cases as well. Not even a single comparable instance was found de....
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....of Shri Rishikesh Dixit recorded on 21.06.2011, it was gathered that the aforesaid Director stated in clear terms that the quantity recorded in the loose slips tallies with the quantity recorded in the regular books of accounts and excise records. These loose slips are destroyed after it becomes redundant with the passage of time. The CIT(A) further observed that neither in the show cause notice nor in the assessment order, there is any whisper of any such loose papers which bears the figure of production and which the appellant failed to reconcile with the entries in the regular books of accounts and excise records/returns. (ix) The alleged low yield in comparison to benchmark of 89% adopted by the AO, the basis whereof is still in dark and not known, cannot in itself provide a ground to reject the books of accounts without showing any defect in books by tangible evidence. (x) The AO has merely proceeded on the basis of suspicion and conjunctures. It is trite that suspicion howsoever strong cannot take place of proof. (xi) The CIT(A) in para 9.22 onwards analyzed the decision rendered by the co-ordinate bench in similar factual matrix to find that additi....
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....,540/- on account of alleged unaccounted sales based on an estimated production yield of 89% in the Steel Melting Shop (SMS) Division of the assessee. However, for the reasons mentioned above, finding that the Assessing Officer has proceeded on the basis of suspicion and conjectures, the CIT (Appeals) has set-aside that addition which the ITAT has concurred with by holding as under: - "27.3 Significantly, in para 9.2 of the first appellate order, the CIT(A) noted while the AO has made discussions on mathematical calculations pertaining rolling material division, the additions have been made towards low yield in SMS Division. 27.4 In conclusion, the CIT(A) observed that assessee has furnished explanation on all the documents seized during the course of search and the explanation of the assessee were test checked with reference to seized material, books of accounts, bills/invoices and other evidences and found to be satisfactory. It was further noted that the AO has not pointed out any infirmity in the explanation of the Assessee. 27.5 The CIT(A) in our mind has analysed the factual matrix threadbare. Without repeating all the observations of the CIT(A), we....
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....idence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in Gurmukh Singh v. CIT 1944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah)." 11. Reverting to the facts of the present case in light of the principles of law relating to Section 145(3) of the IT Act and also considering the principles of law laid down by their Lordships of the Supreme Court in Dhakeswari Cotton Mills Limited (supra), it is quite vivid that the CIT(Appeals) and the ITAT, both, after objectively analysing the factual situation, found complete absence of any adverse material against the assessee which can support the allegation of the AO towards unaccounted production presum....