TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 724
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....g factual backdrop:- 3. The respondent herein/assessee 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 2012-13. 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. 6,65,01,000/- by recording following finding:- "1.2 Thus based on the evidences found during the search and seizure action, following conclusions can be drawn:- (1) During the search and seizure action short stock of finished goods and raw material totaling to Rs. 79,18,418 was found. (2) The actual production shown by the assessee company is much less than the installed capacity and e....
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....fore, based on these evidences, the only logical conclusion that can be drawn is that the books of account of the assessee company are unreliable as they do not reflect the true and correct affairs of its business activities and hence deserved to be rejected." 4. Feeling aggrieved and dissatisfied with the order of the Assessing Officer making addition under Section 153A of the IT Act, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and the CIT (Appeals) by order dated 17-7-2014 allowed the appeal and set-aside the addition of unaccounted sales made by the Assessing Officer. The CIT (Appeals) has summarised the allegations made by the AO in paragraph 7.13 of its order as under:- "7.13 The findings of the A.O at Para 1.2 on Page no.14 of the assessment order are discussed hereunder:- (1) Regarding stock, as stated supra, the A.O. has not drawn any adverse inference as regards difference in inventory. (2) Regarding capacity utilization, the allegation of the A.O that the actual production is much less than the installed capacity has been negated by the appellant by placing on record actual production data i.e. quantitativ....
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....sion may vary from 800 to 1500 KW for production of each MT of Blooms and Billets. The quantitative details of consumption of sponge iron and power were found to be within the reasonable range as certified by the registered valuer." 5. Questioning legality, validity and correctness of the order passed by the CIT (Appeals) deleting the addition made by the AO, the Revenue preferred an appeal before the ITAT and the learned ITAT concurred with the findings of the CIT (Appeals) and dismissed the appeal by the impugned order resulting into filing of appeal before this Court. 6. Mr. Amit Chaudhari, learned Senior Standing Counsel for the Income Tax Department i.e. the appellant herein/Revenue appearing through Video Conferencing, would submit that both the authorities were absolutely unjustified in deleting the addition of unaccounted sales based on an estimated production yield of 89% which is based on the evidence available on record as a result of search and seizure conducted and the assessment order has rightly been passed under the provisions contained in Section 153A read with Section 143(3) of the IT Act which could not have been reversed by the CIT (Appeals) and could not ....
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....and had made various mathematical calculations at Pages 7 to 11 of the assessment order regarding Rolling Mill Division, however, it is seen from the assessment order that the Assessing Officer has not drawn any adverse inference as regards Rolling Mill Division and nor did the Assessing Officer find yield of Rolling Mill Division to be lower. The Assessing Officer has not substantiated the relevance and significance of these mathematical calculations pertaining to Rolling Mill Division. 8.1 We further observe that the Ld. CIT(A) on his own conducted specific enquiry in order to find out the percentage of yield declared by the other assessee engaged in similar line of business. It is noted from such comparison that the yield declared by the different assessees in the same year is not uniform, conversely every assessee declared different yield. Not even a single comparable instance was found declaring yield of 89%. That further, action of the Assessing Officer in rejecting the books of accounts merely due to the reason that the yield achieved by the assessee is less than the yield percentage i.e. 89% which has not been achieved even by other assessees engaged in similar lin....
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....ference to any evidence or any material at all, and observed as under:- "9. As regards the second contention, we are in entire agreement with the learned Solicitor General when he says that the Income Tax Officer is not fettered by technical rules of evidence 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....