TaxTMI 
TaxTMI 
2025 (2) TMI 1442
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.... book results and thereby confirming the estimated addition on account of suppressed sales and profit. 3. The Id. 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 bringing independent material on record. 4. The Id. CIT(A)erred on facts as also in law in retaining estimated gross profit at the rate 11.24% as against the same estimated by the AO at 16.24% on alleged suppressed sale and there by retaining addition of Rs. 27,71,888/- out of total addition of Rs. 40,04,933/- made by the AO. The addition confirmed is unjustified and uncalled for, which deserves to be deleted and may kindly be deleted. 5. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal. 3. The assessee has also raised the following additional grounds of appeal. 1. Ld. AO erred in law and on facts of case in relying on the finding of Central Excise search and seizure action without consid....
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....ounsel for the assessee submitted that the present appeal is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench. Thus, we find that issue, of the assessee, under consideration, is squarely covered by the judgment of jurisdictional ITAT Rajkot, in ITA No. 42/Rjt/2023 order dated 21.05.2023, wherein the Co-ordinate Bench has held as follows: "24. We note that during the appellate proceedings, before ld CIT(A), the assessee has contested the issue of reopening of assessment under section 147 of the Act, however, ld. CIT(A) held that the validity of the reassessment proceedings is to be determined on the basis of the reasons recorded for reopening. At the stage of initiation of reassessment proceedings, the Assessing Officer is not required to hold conclusively that additions invariably be made. He truly had to form a bona fide belief that income had escaped assessment. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. When the Assessing Officer had such material available with him which he perused, considered, applie....
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....he residence of the Director Shri Anandbhai Vadhadia and that the note books were accepted as the details of transaction of sales of Tar Catchers by the said Director. However we find that Shri Ananad Vadhadia in his statement recorded on 08.12.2015 has specifically stated that quotation price to customers were given in some cases which were recorded on right side of two diaries, some cases where advance payments was received against such quotation price were also mentioned in note books, the transaction mentioned in the note books were not actual sales, and that goods were actually not delivered/sold to the customers in some cases where advance payment was received. We also gone through the said disputed Note Books and find that the said note books not clearly shows fact/details about the details of alleged clandestine manufacture and clearance of the disputed goods. It is an admitted position of facts that out of 176 parties found by the revenue officers in said two note books, only five parties were contacted during the investigation and there is no evidences of the remaining parties. 4.1 We also find that assessee filed a reply to show cause notice before the Learned C....
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....ndestine removal are required to be made on the basis of positive and tangible evidence, the same being quasi-criminal in nature. The Revenue has miserably failed to produce corroborative evidence on records so as to substantiate the charges of clandestine removal. In the absence of corroborative evidence, in the present case "the charge of clandestine clearance" cannot be levelled against the assessee. 4.3 We also noticed that the Learned Commissioner has confirmed the demand of duty on the basis of statement of five parties/ buyers, one raw material supplier and one director of the assessee. Assessees had specifically requested for cross examination of the said witnesses, but the witnesses were not offered for cross examination and the impugned order does not contain any reason for denial of this opportunity. Clearly, adjudicating authority has not followed the procedure as prescribed under Section 9D of the Central Excise Act for placing reliance on the statements of said witnesses. In this connection we note that denial of cross-examination and relying on the statements, put the impugned order in legal jeopardy. The provisions of Section 9D of the Central Excise Act, 1....
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....ions of the Bombay & Andhra Pradesh High Courts & of this Tribunal. (i) Southern Steels Ltd. v. U.O.I. - 1979 (4) E.L.T. (J 402) (A.P.) (ii) Kirloskar Brothers - 1988 (34) E.L.T. 30 (Bom.) (iii) Nalanda Tobacco - 1997 (91) E.L.T. 275 (A.P.) (iv) Bhilai Conductors Pvt. Ltd. - 2000 (125) E.L.T. 781 (Trib.) It is very clear that mere non-entry of the productions in the RG-1 will not bring in the liability to confiscation under provision of the Central Excise Rules if there is no corresponding material of clandestine clearance also available. Unaccounted production goes in tandem with clandestine removal and evidence of both has to be present in a given case to avoid the charge to be determined on an assumption/presumption. Applying the tab for liability to confiscation in this case under Rule 173Q(1), we find the test to be not positive. The confiscation arrived is to be not upheld & is to be set aside." 4.5 Similarly in the case of Commissioner of Central Excise & Customs v. Resham Petrotech Ltd. [2010 (258) E.L.T. 60 (Guj.)], the Hon'ble High Court of Gujarat held as under :- "3. As can be seen from the impugned order of....
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.... 2007 (209) E.L.T. 184 (P & H), wherein while relying on the judgement of Hon'ble Supreme Court in Hindustan Steel Ltd. v. State of Orisa, reported as 1978 (2) E.L.T. (J159) (S.C.), it was held that element of mens rea is normally required to be shown for imposition of penalty. Same view was taken in The Commissioner of Income Tax, West Bengal v. Anwar AH, reported as AIR 1970 S.C. 1782. 11. In the present case, the Department has failed to prove the element of mens rea for imposition of penalty. It has been so held by the Commissioner as well as the Tribunal that no case was made out to impose penalty. The finding recorded that no case was made out for imposition of penalty is not shown in any manner to be perverse. 12. In view of the above, we find no merit in this appeal and the same is accordingly dismissed." 4.7 In the case of Commissioner of Central Excise, Hyderabad v. Srinivasa Frozen Foods Ltd. [2010 (262) E.L.T. 594 (Tri. - Bang.)], also, CESTAT held as under:- "5. I have considered the submissions made at length and perused records. The issue involved in this case is regarding the confiscation of the goods which were found unaccounted ....
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....tification of the buyers and receipt of unaccounted cash etc. Mere entries in the private records, do not, ipso facto, lead to the allegation of clandestine removal unless there is corroborative evidence to that effect from independent sources. The Revenue has miserably failed to produce corroborative evidence on records so as to substantiate the charges of clandestine removal. Assessees had specifically requested for cross examination of the witnesses, but the witnesses were not offered for cross examination. Based on these facts, we note that reasons recorded by the assessing officer u/s 147 of the Act are not sustainable in the eye of law. 27. We note that statements and the diaries which were found during the search do not contain any information about removal of the Excisable Goods without paying the Excise Duty, therefore, the Customs, Excise and Service Tax Appellate Tribunal, in assessee`s case has quashed the order based by the lower authorities. No doubt, the decision of Customs, Excise and Service Tax Appellate Tribunal, was not available before the Assessing Officer and before the Ld. CIT(A), therefore they are adjudicated the issue based on the information ava....
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....e proceedings u/s 147 of the Act, itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. 29. We note also note that Assessing Officer was not justified in making the addition to assessee's income in reassessment proceedings, based on the information received from Anti-Evasion Section, Central Excise Commissionarate, Rajkot, because there was no independent material brought on record by the Assessing Officer other than those which were collected by Anti-Evasion Section of Central Excise Commissionarate, Rajkot, and which were yet to be verified at the time when the reassessment proceedings, u/s 147 of the Act, were initiated by the Assessing Officer. For that we rely on the judgment of the Hon'ble Gujarat High Court in the case of Commissionarate of Income Tax vs. Ganga Glazed Tiles (P.) Ltd., 117 taxmann.com 107, wherein it was held as follows: "6. Having heard learned advocates for the parties at considerable length at the outset, we may straightaway agree with the suggestion of the counsel for the Revenue that the present group of cases do not....
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....h respect to the contents of such show-cause notice issued by the Excise department and also elicited assessee's response to the same. Whether this was sufficient to enable him to frame assessment is a question, which we will answer a while later. 8. Before proceeding further, we may discard the contention of the counsel for the assessees that since the excise proceedings had not yet been finalized, the Assessing Officer could not have passed the final order of assessment. This contention would have multiple objections from us. Firstly, as is well known, the adjudication proceedings under the Central Excise Act do not come with time barring provisions unlike as in the Income Tax Act. In fact, the Adjudicating authorities, under the Central Excise Act, enjoy much wider time period even for issuance of show-cause notice in case of the alleged nonpayment or short payment of duty is for any reason of fraud or collusion or willful misstatement or suppression of facts or contravention of the provisions of the Act with intent to evade payment of duty. 9. Under the circumstances, the Assessing Officer cannot be expected to defer completion of assessment awaiting final....
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....dy collected by the Excise department and which, as noted earlier, are yet to be verified. 12. Counsel for the assessees drew our attention to a judgement of Customs, Excise and Service Tax Appellate Tribunal in which, the order of adjudication passed in case of one of the ceramic units (not an assessee before us) by the Adjudicating authority came to be set aside. However, for the following reasons we do not wish to place any reliance on this C/TAXAP/206/2019 judgement: Firstly, the excise show-cause notices in case of the present assessees are yet to be adjudicated. What would be the material on record during such proceedings is not possible for us to foresee. Secondly, the Tribunal has mainly proceeded on the basis of absence of section 4A of the Central Excise Act at the relevant time which, in the opinion of the Tribunal, alone could have permitted the department to substitute the sale price by the transaction value of the goods. Such is not the case in the present group of cases. We would, therefore, be well advised to clear such controversy. 13. When we find that the Assessing Officer did not have the basis for making additions, the questi....
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....ITA No.42/RJT/2023, for assessment year 2013-14, have become academic and, therefore, do not deserve to be adjudicated, hence Appeal of revenue in ITA No.42/RJT/2023, is dismissed. 33. In the result, appeal filed by the Revenue in ITA No.42/RJT/2023, for assessment year 2013-14, is dismissed. 34. Since we have adjudicated the issue by taking the lead case of assessee`s appeal in ITA No.156/RJT/2023, for assessment year 2013- 14, the facts and issues involved in other appeals of the assessee Viz: in ITA No.155/RJT/2023, for assessment year 2012-13, and in ITA No.157/RJT/2023 for assessment year 2014-15, are analogous to ITA No.156/RJT/2023, for assessment year 2013-14. In assessee's appeal in ITA No.157/RJT/2023 for AY.2014-15, the regular assessment was made by the Assessing Officer u/s 143(3) of the Act and not based on reopening under section 147 of the Act. In this order, the Department is not in appeal before the Tribunal, however, the addition was made by the assessing officer based on the findings of the Anti-Evasion Section, Central Excise Commissionerate, Rajkot, which were rejected/ reversed by the Customs, Excise and Service Tax Appellate Tribunal (supra....