TaxTMI 
TaxTMI 
2024 (5) TMI 1669
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....ed in ITA No.156/RJT/2023, for Assessment Year 2013-14, have been taken into consideration, for deciding the above appeals en masse. 3. The appeal filed by the assessee, in ITA No. 156/RJT/2023 for AY. 2012-13, is barred by limitation by 73 days. The assessee moved a petition, requesting the Bench to condone the delay. The ld Counsel for the assessee, explained the delay stating that order of ld CIT(A) under consideration was delivered in company's registered email on 22.12.2022. The e-mail message containing the said order has been stored in "junk mail" folder of e-mail by service provider, instead of delivering the same in Inbox. Therefore, the assessee was unaware of delivery of order of ld CIT(A) in email. Subsequently, assessee came to know about the order of ld CIT(A), under consideration while receiving the order of subsequent year, that is for assessment year(A.Y.) 2014-15, therefore, the delay of 73 days had occurred, which is unintentional, hence in the interest of justice, the delay may be condoned. 4. On the other hand, Learned Commissioner of Income Tax ó Departmental Representative (Ld. CIT-DR) for the Revenue, argued that assessee has failed to expla....
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....s invalid and assessment finalized on such invalid initiation deserves to be quashed, may kindly be quashed. 3. The learned CIT(A) erred on facts as also in law in confirming the rejection of book results and confirming the estimated addition on account of suppressed sales and profit. 4. The ld. CIT(A) also erred in not following decision of the Hon'ble High Court of Gujarat in the case of PCIT vs. Ganga Glazed Tiles (P.) Ltd, which has been upheld by Hon'ble Supreme Court, wherein it is held that no addition can be made by the AO without brining independent material on record. 5. The Id. CIT(A)erred on facts as also in law in retaining estimated gross profit at the rate 25% as against the same estimated by the AO at 36.64% on alleged suppressed sale and thereby retaining addition of Rs. 6,91,48,730/- out total addition of Rs. 9,21,45,621/- made by the AO. The addition confirmed is unjustified and uncalled for which deserves to be deleted and may kindly be deleted. 6. Your Honour's assessee craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal." 7. Brief facts, as discern....
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....emises of the assessee on 11.10.2013 of M/s Parot Power Pvt. Ltd. at 18- Sadguru Industrial Estate, Morbi-Rajkot Highway, Near Lajai Village, Morbi. 8. Therefore, a Panchnama was drawn at the factory premises of the assessee on 11.10.2013 in presence of two independent panchas and in presence of Shri Anand Rameshbhai Vadhadia, Director of M/s Parot Power Pvt. Ltd, Morbi. During the course of the search action the statement of Shri Anand Rameshbhai Vadhadia, Director of M/s Parot Power Pvt. Ltd., Morbi was recorded; wherein he inter alia stated that the figures shown in sales ledgers and other financial are underreported so as to keep the company's turnover below Rs.1.50 Crores threshold limit to evade payment of Central excise duty. He further stated that the company had not obtained Central Excise registration and had not paid Central Excise duty on the clearance made by them; that the financial transactions were recorded in two separate notebooks, which were resumed from the residential premises under Panchnama dated 11.10.2013, for which invoices may or may not have been prepared; that the figures shown in the said notebooks are in Lacs e.g. where 5.00 is written, it repr....
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....atcher, the amount on which the sale transaction is finalized (on the right side of the page) and date-wise sale proceeds received from the customers (on the left side of the page), that the Notebook 'Prime' having pages from 01 to 34, contains the details of sale transaction of the goods manufactured by them and reflected in the same fashion as that of the notebook 'Navneet' and that the sales amount mention in both notebooks is in lacs, which mearts"15.00" is to be read as Rs.15,00,000/- and "17.50" is to be read as Rs.17,50,000/-; that the payment sale proceeds appearing in the both above two notebooks have been received in cash, except for billed amount. 10. During the assessment proceedings, the director of the assessee- company, Shri Anand Rameshbhai Vadhadia, was requested to submit the list of customers/buyers along with their mailing address since the same were not available in the said two Notebooks which were submitted by him on 18.09.2015. Another Statement of Shri Anand Rameshbhai Vadhadia, Director of the assessee- company was recorded on 08.12.2015, wherein, after going through the statements of Shri Navneet Martsukhbhai Jivani, Director of M/s Fam....
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.... how the payment was made, he stated that the transportation was arranged by their customers only and that he had never paid the transportation charges for the finished products. Shri Anand Rameshbhai Vadhadia, Director of the assessee- company agreed that the total sales value of Tar Catchers not delivered amounted to Rs. 19,75,67,800/-. The year wise breakup of goods clandestinely was worked out at Rs.19,75,67,800/- for the year under consideration. 11. The assessing officer observed that the sales were suppressed by way of unaccounted sales. Thus, all the inevitable expenses viz, Power, Fuel, Gas etc; of suppressed sales are already included in total expense and claimed. Thus the GP before incurrence of such expense will have to be considered for working out profit on suppressed sales. The gross profit in the case of the assessee is of Rs.41,82,600/-. The fuel and power expenses debited by the assessee are Rs. 11,27,996/-. If the fuel and power expenses are added back to the gross profit, the total comes to Rs. 53,10,596/-. The total turnover in the case of the assessee is Rs. 1,44,92,842/-. Therefore, the gross profit rate without including the power and fuel expenses comes ....
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....rious manufacturing expenses made for production of the goods. Such expenses include the expenses on Manufacturing & Operating cost, Labour Wages & Production salary. The above expenses are such expenses which are debited for all the production of the concern, whether accounted or unaccounted. Therefore, while working out the gross profit in your case the same has to be calculated without including the above expenses. The gross profit in your case is Rs. 41,82,600/-. The above expenses debited by your company is Rs. 11,27,996/-. If the above expenses are included into the gross profit, the total comes to Rs. 53,10,596/-. The total turnover in your case is Rs. 1,44,92,842/-. Therefore the gross profit rate without including the above expenses comes @36.64%. Therefore, the profit from the unaccounted sales made by you comes to Rs. 7,23,88,841/-. Accordingly, the profit of your company from the aforesaid clandestine removal of the goods found during the course of search by Central Excise Department is estimated at Rs.7,23,88,841/-. As the sales were not genuine and business activity has been with a motive to suppress the clandestine removal of goods without payment of Excise Duty. It ....
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....g power / fuel expenses. The gross profit in the case of the assessee is of Rs. 41,82,600/-. The fuel and power expenses debited by the assessee are Rs. 11,27,996/-. If the fuel and power expenses are added back to the gross profit, the total comes to Rs. 53,10,596/-. The total turnover in the case of the assessee is Rs. 1,44,92,842/-. Therefore, the gross profit rate without including the power and fuel expenses comes to 36.64%Therefore, the profit from the unaccounted sales made by the assessee comes to Rs. 7,23,88,841/-. Moreover, investment in unaccounted purchase is estimated at 10% of such total unaccounted sales which works out to be Rs. 1,97,56,780/- (10% of 19,75,67,800). Accordingly, the Profit on suppressed sales be estimated of Rs. 9,21,45,621/- [on account of GP (36.64% of 19,75,67,800 = 7,23,88,841) + on account of initial investment in unaccounted purchase (10% of 1,97,56,780 = 1,97,56,780)]. An addition of Rs.9,21,45,621/- was therefore made by the assessing officer to the total income of the assessee on account of profit on unaccounted sales not disclosed in the books of accounts. 15. Aggrieved by the order of Assessing Officer, the assessee carried the matter i....
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.... sales are already included in total expenses claimed by the assessee and therefore GP before incurrence of such expenses will have to be considered for working out profit on suppressed sales. Therefore, ld CIT(A) proceeded for re-calculation of Gross Profit ( in brief "GP"). The ld CIT(A) noticed that if the entire expenses on power, fuel and gas incurred by the assessee have been debited and claimed against disclosed turnover of Rs. 1,44,92,842/-; the said expenses are to be ignored while calculating GP ratio for suppressed sales. However, it is also a fact that all other incidental expenses incurred in relation to suppressed sales have not been considered, if the GP ratio is taken as profit embedded on suppressed sales. The assessee has not made aground to take net profit as profit embedded in suppressed sale. No details of expenses incurred against the undisclosed sales has been filed by the assessee. Several expenses even if incurred by the assessee may not be allowable due to various provisions like non-deduction of TDS and consequent disallowance u/s 40(a)(i), cash payments attracting provisions of 40A(3) etc. Therefore, the net profit ratio declared by the assessee cannot b....
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....e the reason were recorded based on the information available from the Central Excise Division Morbi, and later on, the Customs, Excise and Service Tax Appellate Tribunal, has reversed the findings of anti-evasion section- Central Excise Commissioner and decided the issue in favour of assessee. Hence, reasons recorded by the assessing officer are vitiated, and therefore, based on the subsequent decision of the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad, vide Excise Appeal No.10691 of 2017 (supra), the reassessment proceedings initiated against the assessee under section 147/148 of the Act may be quashed. 21. The ld Counsel also argued that before issuing notice under section 147 of the Act, the assessing officers should have conducted independent enquiry, which he has failed to do so, as the material collected by the excise department were yet to be verified. Therefore, ld Counsel contended that the reassessment proceedings initiated against the assessee may be quashed. 22. On the other hand, Ld. CIT-DR for the Revenue relied on the findings of the Assessing Officer. 23. We have heard both the parties and carefully gone through the su....
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....is of entries in two notebooks which was accepted by the Director of the assessee-company in his statement. The assessee had not obtained Central Excise Registration and was removing the finished goods clandestinely. The customers/buyers were also examined and the unaccounted sale was further established by their statements. The copy of show-cause notice dated 10.03.2015 issued by the Assistant Commissioner, Central Excise division, Morbi was in the possession of the assessee as well as with the assessing officer(AO). The information of the Central Excise along with show -cause notice was examined by the AO who after application of mind came to formation of belief that income had escaped assessment. The exact quantification of unrecorded sales based on entries in the two note books supported by statements of Director and the customers and also supported by the fact that the transportation was arranged by those customers point to the fact that there was sufficient material or evidence leading to reasons to believe that income had escaped assessment. The information cannot be treated as vague in this case and the AO has correctly reopened the case after proper application of mind. Th....
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....Note Books is not reliable. It is not open to drop the evidence in favour of the assessee and to pick up the partial evidence which may be against the assessee. It is the appreciation of entire evidence which needs to be done for arriving at the final conclusion, which cannot be arrived on the basis of pick and choose method. We find that only on the basis of said disputed entries of the Note Books charges of clandestine manufacture of 'Tar Catchers' and clandestine clearances of the said goods from assessee's factory is not sustainable. The investigation in the present case has been very sketchy and will not support the findings in the impugned order. 4.2 The allegation of clandestine production and removal are required to be arrived at on the basis of positive and tangible evidences including the evidences relating to procurement of raw-materials, conversion of the same to final products, clearances of the same and identification of the buyers and receipt of unaccounted cash etc. It has been the ratio of various decisions of the higher courts that mere entries in the private records, do not, ipso facto, lead to the allegation of clandestine removal unless the....
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....&H) held that Adjudicating Authority cannot straightaway rely upon the statement recorded during the investigation before the central excise officer, unless and until, he can legitimately invoke clause (a) of Section 9D(1). The statements given under Section 14 are to be examined before the Adjudicating Authority and if the same is not done, it cannot be taken as reliable evidence. If the maker of the statement is examined by the Department, cross-examination of the said person must be allowed, if sought for by the assessee. We find legal ratio regarding cross-examination of the person, whose statement has been relied upon by the Department, has been laid down by the Hon'ble Delhi High Court in Basudev Garg - 2013 (294) E.L.T. 353 (Delhi) = 2017 (48) S.T.R. 427 (Del.) and Hon'ble Allahabad High Court in Parmarth Iron Pvt. Ltd. 2010 (260) E.L.T. 514 (All.). Further, reference can be made to the decision of Hon'ble Delhi High Court in J.K. Cigarettes Ltd. - 2009 (242) E.L.T. 189 (Delhi) = 2011 (22) S.T.R. 225 (Del.)and Hon'ble Allahabad High Court in Govind Mills Ltd. - 2013 (294) E.L.T. 361 (All.). In the present case, we find that the statements were relied upon as ....
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.... pay duty arises at the point of time when the goods are to be removed from the factory premises. Admittedly, the goods were found lying in the factory premises. Therefore the occasion to pay duty had not arisen. In other words, the liability to pay duty had not accrued in law. In the circumstances, it is not possible to accept the contention of the assessee that an inference should be drawn that the goods were to be clandestinely removed and hence confiscation was permissible. Such an inference should be possible if there are other surrounding or attendant circumstances. In the present case, no such evidence exists on record. The Tribunal was, therefore, justified in coming to the conclusion that the confiscation of goods was not justified." 4.6 Further, in the case of Commissioner of Central Excise, Chandigarh v. Sadashiv Ispat Ltd. [2010 (255) E.L.T. 349 (P & H)], the Hon'ble High Court of Punjab and Haryana held as under :- "8. A perusal of the impugned order shows that no evidence has been produced by the Revenue that the respondent had cleared the goods unaccounted and the goods were kept for clandestine clearance. In the present case, even if the goods ....
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....he clandestine removal in respect of other show cause notice, which also was issued based upon the very same investigations and visit by the officers, the respondent had settled the issue before the Settlement Commission. The proceedings which were settled by the respondent before the Settlement Commission cannot be brought into play for holding against the respondent in another show cause notice. 6. Be that as it may, I find that the goods once they are in the factory premises, no penalty can be imposed on the respondent under the provisions of Rule 173Q, as has been held by the majority decision of the Tribunal in the case of Bhillai Conductors (P) Ltd. (supra). In view of this, I hold that the goods which were found in excess in the factory premises are not liable for confiscation and the adjudicating authority's order of dropping the issue under the show cause notice is correct and does not require any interference on this count." 4.8 In the light of the above settled law on the issue it is observed that in the present case also the goods were lying within the assessee's factory. There was no evidence on record to show that there was any attempt to rem....
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.... Tax Appellate Tribunal (supra) in assessee's own case. That is, no addition was made or sustained by the Customs, Excise and Service Tax Appellate Tribunal, based on the findings, of the Anti-Evasion Section, Central Excise Commissionarate, Rajkot, and we note that based on these findings, the assessing officer under the Income Tax Act, had recorded the reasons under section 147 of the Act, stating that assessee's income has escaped assessment, which is now not sustainable in law in view of the decision of the Customs, Excise and Service Tax Appellate Tribunal (supra) in assessee's own case. Thus, the basis of reopening of the assessment under section 147 of the Act is not sustainable in the eye of law, as there is no foundation. Therefore, we are of the view that initiation of reopening proceedings under section 147/148 of the Act has vitiated as there is no foundation to uphold the order of the assessing officer under section 143(3) r.w.s. 147 of the Act dated 05.12.2017, on the same facts, which were adjudicated in favour of assessee, in the assessee's case by the Customs, Excise and Service Tax Appellate Tribunal(supra). 28. Hence we find that the basic premise ....
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....for the financial year 2006-07 was scrutinized by the Assistant Commissioner of Commercial Tax. The assessee was served with the show-cause notice by the said authority indicating that he has reason to believe that taxable turnover was suppressed. This was on the basis of a show-cause notice issued by the Excise department pursuant to the raid indicating that the petitioner had suppressed sales to the tune of Rs. 5.25 crores and thereby evaded tax duty to the extent of 73.55 lacs. The Assistant Commissioner of Commercial Tax therefore, prima facie held a belief that the assessee's sale of Rs. 5.97 crores (i.e. the suppressed sale of 5.25 crores coupled with excise duty element of 73.55 lacs) had escaped assessment. He accordingly, framed the assessment after rejecting the petitioner's objections. Such assessment order was challenged by the petitioner before the High Court on the ground that the Assistant Commissioner of Commercial Tax had proceeded merely on the show- cause notice issued by the Excise Department without any further verification. The Court noticed that the entire order of reassessment proceeded on the show- cause notice issued by the Excise department withou....
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....xamine the central question viz. did the Assessing Officer have sufficient material at his command to believe evasion of tax? We have noticed the broad modus operandi stated to have been C/TAXAP/206/2019 JUDGMENT adopted by the assessee as per the excise show- cause notices. Admittedly, these show-cause notices are only at such stage without in any of these cases the final orders of adjudication have been passed by the Excise authorities. These show-cause notices thus merely present the material collected by the Excise department suggesting the view of the department that this is a case of large scale excise evasion. Before final order levying excise duty with interest and penalty can be passed, these facts have to be established through by parte proceedings. Till then, it only remains in the realm of the stand of the department which is yet to be tested. 11. In addition to confronting the assessee with the contents of the show-cause notice issued by the Excise department, the Assessing Officer has done little else. He of course called upon the assessee to respond to the allegations contained in the show-cause notice, to the statements and materials accompanying such show-....
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....ome chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the Assessing Officer which may trigger reason to suspect. It must be kept in mind that the 'reason to believe' must have a rational connection with or relevant bearing on the formation of the belief, i.e there must be the direct nexus or link between the material and the formation of such belief. Since in the assessee's case under consideration since the assessing official has reopened the assessment based on the findings of the Anti-Evasion Section, Central Excise Commissionarate, Rajkot, which were rejected/ reversed by the Customs, Excise and Service Tax Appellate Tribunal (supra) in assessee's own case. Therefore in the facts and circumstances of the case, we are of the considered opinion that 'reason to believe' which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the instant case and therefore the action of the Assessing Officer to reopen the assessment is null in the eyes of law and hence we are inclined to quash the initiation of reassessment proceedings being ab-in....