TMI Blog2015 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional production should be utilized for extrapolating the sales in the hands of the assessee for the entire year. Admittedly, the assessee had offered additional income on the said clandestine removal of material without payment of Excise duty, which is to be added as income in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that in case the said additional income has not been added while computing the income in the hands of the assessee for the respective years, the same may be directed to be added in the hands of the respective assessee in respective years. Accordingly, we direct the Assessing Officer to verify from the records for the respective years and include the additional income on account of such admitted clandestine removal of material without payment of Excise duty, by the assessee either before the Settlement Commission or before the Excise authorities, in the hands of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of cross appeals filed by the different assessees and the Revenue are against separate orders of CIT(A), Aurangabad passed under section 143(3) r.w.s. 147 and/or under section 143(3) respectively of the Income Tax Act, 1961 and the details of respective assessees are as under :- Sr. No. Appeal No. Name of Assessee Date of order of the CIT(A), Aurangabad Asstt. Year 1. ITA Nos.284 to 286/PN/2012 Bhagyalaxmi Steel Alloys Pvt. Ltd. 30/12/2011 2006-07 to 2008-09 ITA Nos.437 to 439/PN/2012 2. ITA Nos.179 to 182/PN/2012 Omsairam Steel Alloys Pvt. Ltd. 06/01/2012 2005-06 to 2008-09 ITA Nos.656 to 659/PN/2012 3. ITA No.1084/PN/2012 Omsairam Steel Alloys Pvt. Ltd. 30/04/2012 2004-05 ITA No.1468/PN/2012 4 ITA No.1466/PN/2012 M/s Rishi Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence of purchase of raw material or sales of finished products out of books. 6. The learned Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppression of production on the grounds of monthly variation in consumption of electricity vis a vis production. 7. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in holding that the books of accounts of the appellant company are correctly rejected u/s. 145 of the Income Tax Act without any evidence or finding as to how the provisions of Section 145(3) are satisfied. 8. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in making an addition on account of alleged suppression of sales without giving any show cause notice to the appellant company to explain the facts against the proposed huge addition on this account which is against the rules of natural justice. 9. The learned Commissioner of Income Tax (Appeals) further erred in confirming the addition on account of Gross Profit @ 4% on the alleged suppression of sale of ₹ 28,59,32,329/-. 10. The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer recorded reasons for reopening the assessment under section 147 of the Act and notice under section 148 of the Act was issued on 30.03.2010. The assessee in response stated that the original return of income may be treated as filed in response to notice under section 148 of the Act. In response to statutory notices received, there was representation by the assessee and the Assessing Officer notes that the books of account were produced which were verified on test check basis. The assessee was show-caused with the amount of income escaping assessment amounting to ₹ 28,59,32,329/-. The Assessing Officer thereafter considered the manufacturing process of the assessee in detail and noted that the electricity was one of the major cost input in the process of manufacture of ingots/billets and also accounted for major share of expenses. The Assessing Officer also noted that the assessee had consumed sponge and scrap and the data of consumption was compared with the purchase of raw materials. The Assessing Officer during the course of assessment proceedings asked the assessee as to why the consumption of electricity per metric tonne should not be adopted for the purposes of cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also noted substantial variation in yield and shortages during various months in the years under appeal. (5) The decision in the case of ACIT Vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune) has been relied on by the appellant. The facts before the Hon'ble ITAT while deciding the said cases were Afferent to some extent. In the said cases, clandestine removal of goods by the appellant and the admission of the appellant about the said fact of unaccounted transactions was not before the Hon'ble ITAT. Further, the detailed order of the Commissioner of Excise and the other facts brought on record by the A.O. in the assessment order was not before the Hon'ble ITAT, Pune while deciding the above referred cases. Further in the said cases action u/s 132 was conducted and the appellant was assessed u/s 153A of the Act and hence addition in respect of completed assessments in such cases could be made only on the basis of material found in search action. In view of the above facts, the reliance placed by the appellant on the above referred decision is misplaced. Further, the other decisions relied on by the appellant in support of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions have been made by the Hon'ble Appellate Tribunal in the case of other manufacturers. The Hon'ble CESTAT has also taken support of decision of Hon'ble Madras High Court in the case of Alagappa Cement Pvt. Ltd. Vs. CEGAT CCE, Trichy (2010-TIOL-770-HC-MAD-CX) and held that the Revenue cannot be faulted for demanding duty on the steel ingots which could have been manufactured by consuming excess quantity of electricity. The Hon'ble Appellate Tribunal has held in concluding para-22 that none of the appellants except M/s Shree Steel Castings has made out the prima-facie case on merits. They cannot raise a valid plea of limitation either. Suppression of relevant facts is inbuilt in clandestine production of Excisable goods and its removal without payment of duty, and the same, prima-facie, stands established in these cases. 7.3 In view of the facts of the case and above mentioned reasons mentioned by the A.O. and respectfully considering observations in the decision of Customs, Excise Service Tax Appellate Tribunal, West Zonal Bench order 01/03/2011 in the case of the appellant and others, I hold that there is suppression of sale and profit in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that because of the circumstantial evidence i.e. the order passed by the CCE, Aurangabad presumption was against the assessee. Reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in Melton India vs. CIT reported in 2007-TIOL-14-SC-CT. Further, the Ld. Special AR pointed out that the assessee had failed to furnish any evidence with regard to the huge fluctuation in electricity consumption and also no wages register was produced by the assessee. The Ld. Special AR pointed out that no doubt the Department has to show the prima-facie evidence against the assessee, but where the prima-facie evidence has been shown, the onus was on the assessee to explain the same. The Ld. Special AR in this regard placed reliance on the ratio laid down by the Hon ble Supreme Court in Collector of Customs, Madras And Others vs. D. Bhoormull reported in 2002-TIOL-253-SC-CUS. It was further alleged by him that no books of account were produced and no explanation was filed by the assessee, in the absence of which the addition in the hands of the assessee is justified. He further admitted that the case laws relied upon were cited before the Tribunal in SRJ Peety Stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee before us was that once the additions made by the CCE, Aurangabad have been deleted by the Third Member of CESTAT, no addition under the Income Tax Act is to be made in the hands of the assessee as the basis for reopening the assessment in the hands of the assessee was the order of the CCE, Aurangabad, which has been overturned by the Third Member of CESTAT. The Ld. Authorized Representative for the assessee further referred to para 12 of Third Member of CESTAT which talks about the collection of corroborate evidence and since nothing was found against the assessee, there was no merit in any addition in the hands of the assessee. The Ld. Authorized Representative for the assessee further took us through the order of the Tribunal from para to para and page to page and pointed out that all the submissions made by the assessee have been considered by the Tribunal in SRJ Peety Steels Pvt. Ltd. (supra) and in view thereof the issue in the present case merits to be allowed. 11. In respect of grounds of appeal No.1, 2 and 11 in assessment year 2006-07, the Ld. Authorized Representative for the assessee submitted that it is agitating the reopening under section 147 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Omsairam Steel Alloys Pvt. Ltd.) : ITA No.1084/PN/2012, A.Y. 2004-05 (By Assessee in the case of Omsairam Steel Alloys Pvt. Ltd.) : ITA No.1468/PN/2012, A.Y. 2004-05 (By Revenue in the case of Omsairam Steel Alloys Pvt. Ltd.) : 14. The assessee is in appeal against the order of CIT(A), Aurangabad relating to assessment years 2004-05 to 2008-09. The Revenue has also filed crossappeal against the aforesaid order of the CIT(A), Aurangabad for all the above-said years. 15. The ground of appeal raised on reopening of the assessment was not pressed by the Ld. Authorized Representative for the assessee. In respect of the issue on merits, the Ld. Authorized Representative for the assessee pointed out that the issue is identical to the issue raised in SRJ Peety Steels Pvt. Ltd. (supra). It was further pointed out by him that evidence regarding the clandestine removal of material without payment of excise duty and the admission of the assessee by way of petition before the Settlement Commission, was found in the hands of the assessee relating to assessment years 2006-07 to 2008-09. 16. The Ld. CIT-DR for the Revenue referred to the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of the Special AR for the Revenue as he was not ready to argue the appeals. The reasons stated in the letter dated 10.03.2015 for seeking adjournment i.e. contemplation of filing MA against the earlier orders of the Tribunal, was rejected. The appeals were adjourned to 13.03.2015 and then 05.05.2015 at the request of the Special AR. On 05.05.2015, the Counsel for the assessee opened his arguments which were replied to by Special AR for the Revenue. On 05.05.2015 itself, the Special AR filed written submissions alongwith compilation of case laws and the matter was adjourned to 07.05.2015 for further hearing. On 07.05.2015, the case was taken up in the pre-lunch hour and was argued at length by the Special AR for the Revenue. The Counsel for the assessee strongly opposed the same on the ground that the Special AR for the Revenue had concluded his arguments on earlier date and today the matter was fixed for his rejoinder. The hearing could not be concluded in the pre-lunch hour session and it was directed that the hearing would continue at 03:00 PM i.e. after the lunch hour to which both the parties consented. On reassembling of the Bench, the Special AR for the Revenue furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when Shri J.P. Bairagra present for the assessee and Shri Sunil Ganoo, Ld. Special AR, Smt. M.S. Verma, CIT-DR Shri Rajesh Damor were present for the Department. 22. Though the assessee has raised several grounds of appeal, but the issues raised by the assesse are four-fold on the following accounts:- a) Reopening of assessment under section 147 and non-supply of reasons for reopening the assessment under section 147 of the Act; b) Non-issue of notice under section 143(2) of the Act after reopening the assessment under section 147 of the Act; and c) Addition made on account of alleged suppression of sales on the basis of consumption of electricity as per US standards and evasion of Excise duty by the manufacturers of TMT bars in Jalna cluster found by Director General of Central Excise and Customs; and working out the addition by applying GP rate of 4% on the alleged suppression of sales, after rejecting the books of account under section 145 of the Act. d) Addition made on account of investment in purchases relating to suppression of sale. 23. The Revenue on the other hand, is in appeal against the order of CIT(A) on the following grounds:- a) In quantifyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have raised their arguments in favour of/against the order of the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra), we first refer to the decision of the Tribunal and then meet with the respective objections of both the authorized representatives. 27. Though the case of the learned Authorized Representative for the assessee was that the issue raised in the present appeal was identical to the issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra). However, the Ld. Special AR stressed that the issue was at variance and made elaborate submissions. It may be put on record that M/s. SRJ Peety Steels Pvt. Ltd. (supra) is a case of furnace, which is engaged in the manufacture of ingots / billets. In the case of M/s. SRJ Peety Steels Pvt. Ltd. (supra), there was an order of Central Excise Commissioner, Aurangabad in relation to suppression of production on account of erratic consumption of electricity. The assessee filed an appeal against the said order of CCE, Aurangabad before the CESTAT and the Third Member of CESTAT deleted the addition made in the hands of respective furnace cases. Also, in the case of the assessee before us, there is order of CCE, Aurangabad and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the Ld. CIT(A) that the entire value of alleged suppressed production/sales of Ingots and Billets cannot be treated as income of the assessee and some reasonable percentage of the gross profit is to be estimated. Ld. CIT(A), accordingly, directed the Assessing Officer to adopt gross profit @ 4% on the value of alleged suppressed production/sales and accordingly, partly sustained the additions. Now, we first decide the core issue in this case (i) On the facts and circumstances of this case whether the Assessing Officer was justified in making the addition of ₹ 39,20,36,546/- in the A.Y. 2007-08 and ₹ 40,75,72,486/- in the A.Y. 2008-09 on alleged suppression of production/sales and; (ii) Whether the Assessing Officer was justified in holding that the books of account of the assessee does not give the correct picture of the state of affairs and hence, those books of account needs to be rejected. 29. After considering the submissions of the assessee in paras 10 to 10.5 at pages 12 to 16 and also summarizing the submissions of the Ld. Special AR in paras 11 to 11.6 at pages 16 to 22 and the rejoinder of the assessee in paras 12 to 12.1 at pages 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e here that in this case that there was a search and seizure action against the assessee and its group companies by the Income-tax Dept. on 17-03- 2006 and in consequence of the search and seizure action u/s. 132(1) the assessments of the assessee have been framed u/s. 153A r.w.s. 143(3) for the A.Ys. 2000-01 to 2006-07. It is also pertinent to note that during the course of search and seizure operation no incriminating evidence was found suggesting that the assessee has suppressed the production as compared to the consumption of the electricity. No excess stock of finished goods was also found. We also put on record that the assessment framed by the Assessing Officer in consequence of search and seizure action against the assessee u/s. 153A r.w.s. 143(3) have reached the Hon'ble jurisdictional High Court. We will later refer to the decision of the Tribunal as well as Hon'ble High Court and certain important observations made in respect of the assessment framed by the Assessing Officer. It is also to be taken note that the A.Ys. 2007-08 and 2008-09 before us are immediately next assessment years after the assessments in consequence of search and seizure action u/s. 132(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Om Rolling Mills Pvt. Ltd. i.e. Ingots/ Billets, were removed clandestinely without payment of excise duty and the said material was to extent of 275 MTs. The sale price was received in cash from Shri Om Rolling Mills Pvt. Ltd. and hence, there was no accounting. The assessee admitted the said charge of the Central Excise Authorities i.e. DGCEI and approached the Settlement Commission and paid the excise duty to the extent of ₹ 7,79,313/- for clearing the goods without payment of excise duty. The declaration filed by the assessee was accepted without any further addition or objection filed by the Central Excise Authorities. The Settlement Commission levied the penalty of ₹ 8,000/-. 16. The Assessing Officer also has in detail discussed the process involved in the manufacturing of Ingots as well as Billets in the assessment order. At this stage we are not concerned with the said discussion which is in Para No. 4.1 of the assessment order. The Assessing Officer in his discussion for arriving at the conclusion that as compared to the consumption of the electricity shown by the assessee the production was much more lower, has given the examples or reference of so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer while completing the assessment u/s. 143(3) of the Act in the order dated 31-12-2008 and made the net addition of ₹ 30,76,35,042/-. So far as A.Y. 2008-09 is concerned no adjustment was made in the A.Y. 2008-09 as it was the regular assessment u/s. 143(3) of the Act. Even though in the A.Y. 2008-09, the Assessing Officer has observed that the information received from the Central Excise Authority is not relevant, but finally the assessment order is framed on the basis of the order passed by the Commissioner of Central Excise and Custom, Aurangabad as per the value determined in the adjudication order for the purpose of levy of excise duty adopting statistic of power consumption. In the computation for the A.Y. 2008-09 the Assessing Officer made the mistakes by mentioning Rs. (-) 1,91,62,000/- as per the order u/s. 143(3) when in fact the said figure is as per the return of income filed by the assessee for the A.Y. 2008-09. 30. After analyzing the submissions of the assessee, the Tribunal noted that in both the years before it, the Assessing Officer had determined the alleged suppression of production / sales as determined by the CCE, Aurangabad on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s records. The Ld. CCE accordingly, observed that the assessee has willfully suppressed the figures of production of Billets/MS Ingots in their records with an intent to evade payment of Central Excise Duty and, have involved themselves in the clandestine removal of final products. He also referred to the show cause notice issued by the DGCEI to the assessee which matter was ultimately settled by the assessee company in the Settlement Commission. The Ld. Commissioner also referred to non-maintenance of the proper electricity consumption record more particularly in Form G-7. The Ld. Commissioner also gave the data of production from April, 2003 to March, 2008 in his order. He has also recorded the objections of the assessee company. It appears that the assesse demanded the cross examination of Dr. N.K. Batra, Professor of IIT, Kanpur which opinion was heavily relied on by the CCE, Aurangabad. The Ld. Commissioner observed that the said Dr. N.K. Batra was no more and hence, his cross examination was not possible. He has also discussed and referred to the different decisions of the Tribunal. The Ld. Commissioner also relied on the investigation made by the DGCEI and show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 1000 to 1800 units per Ton or even higher, as per Letters dated 18.3.2008 and 25.4.2008 of same Mr. R.P. Varshney [All India Induction Furnaces Association] informing that his Article prepared in 1989-90 was for Concast Steel making [thus not for Induction Furnace], (vi). 620 to 690 units/MT as per Letter dated 22,6.2008 from Electrotherm, (vii). Letter dated 9.8.2008 of Electrotherm to a client suggesting reasons which lead to high power- consumption, and another Letter dated 5.4.2008 of Electrotherm agreeing-., with .the views of Induction Furnace Association and informing that it is very difficult to define any range of power consumption. 20.2 As against this, in para 20 of the Order, the Tribunal in R.A. Casting (supra) considered different electricity consumption figures for production of 1 MT of MS Ingots, reported in following different reports- (i). 555 to 1046 (KWH/T) as per Dr. Batra's report; (ii). 1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii). 1427 KWH/T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v). Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal, 20.5 However, since no such evidences were brought on record, the Appeal of R.A. Casting was allowed for want of evidence relating to the above points, with further finding that the Revenue, not having conducted any experiment whatsoever, cannot be permitted to justify the demands .raised. Similar is the fact situation in the instant appeals, 20.5 The evidence as per Revenue in the instant appeals are a). High electricity consumption without any explanation, b). Sale of Ingots at loss, which was economically and commercially not possible, c). Discrepancies in financial accounts in some cases and/or any proceedings under Income Tax, d). Claim of higher Auxiliary load, e). Past case settled before Settlement Commission, 20.7 So far as the proceedings already se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. The Revenue sought to rely on an order passed by Tribunal in GuIabchand Silk Mills Pvt. Ltd., V/s. CCE, Hyderabad-II, 2005 (184) ELT 263, however the same was also considered in R.A. Casting (supra). It has been contention of the department that the Department is not required to prove its case to its mathematical precision, by relying on judgment of the Hon'ble Supreme Court in the case of D. Bhoormull - 1983 (13) ELT 1546 (SC), relied upon by the Commissioner as well as the Hon'ble Member (Technical). It is seen that even this judgment was considered in R.A. Casting (supra), 21. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions, Regarding the claim of the Revenue that subsequent to passing of impugned Orders the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than Central Excise Act, do not any manner help in sustaining the findings recorded in the impugned Order. In none of these cases any theoretical repot was relied for arriving at deemed production. 24. Further, in Sarvana Alloys Steels Pvt Ltd, 2011- (274) ELT 248 (Tri-Bang.) similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments in D. Bhoormull (supar), Gulabchand Silk Mills (supra), as also Hans Casting (supra). In A.K. Alloys, 2012 (275) E.L.T. 232 (Tri. - Del.) the Tribunal followed the decision of R.A. Casting (supra) and allowed the appeal, as the demand was based mainly on the evidence of power consumption without any evidence of clandestine removal. 25. I therefore concur with the findings of the Hon'ble Vice President and in my opinion, the judgment in R.A. Casting (supra) would be squarely applicable in the facts of the instant case in all the appeals. 19.4 The common order was passed by the CESTAT on 30-07-2006 as per the majority opinion allowing the appeals filed by the assessee and other appellant companies. The copy of the majority order is placed at Page Nos. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlement Commission when on the basis of investigation made by the DGCEI against some of the brokers and sub-brokers dealing in the Ingots/Billets and TMT Bars show cause notice was issued to the assessee company and matter was settled. Ld. CCE, Aurangabad in his order has taken in to consideration said matter while determining the value of the alleged suppressed production and has observed as under: 19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance that assessee had approached the Settlement Commission, admitted the evasion offence of an identical nature and had obtained immunity from criminal proceedings. The assessee has however argued that each case has to be treated as a separate case based on its own merit and dealt with accordingly. The argument of the assessee is accepted. No reliance has been placed on evidence relied upon in central excise proceedings. The findings in this case are based only on material and evidence that have been brought on record in the instant case. 33. The Tribunal thereafter, noted another aspect of the issue that no independent investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order was subject matter before the CESTAT and said order has been set aside. Hence, we do not consider it necessary to deal with decisions relied on by Ld. Spl AR of the Revenue which are in context of admission of the Director of the assessee in the course of investigation made by DGCEI more particularly under the Indian Evidence Act as those decisions are not relevant now though good for academic discussion. So far as maintaining of Form G-7 in respect of the electricity consumption, the said issue was also before the CESTAT while deciding the fate of order of the Ld. CCE, Aurangabad. Ld. AR vehemently argued to point out how the order of the CESTAT, Mumbai Bench, Mumbai is not correct. The CESTAT is a higher appellate forum under the Custom Act 1962 and Central Excise Act 1944 and we cannot sit as revisionary authority or make any observation whether that order is right or wrong. 35. The Tribunal held that CESTAT was an appellate forum under the Customs Act, 1962 and Central Excise Act, 1954 and the Tribunal (Income-tax) could not act as revisionary authority or make any observation whether that order was right or wrong. 36. The Tribunal further referred to search and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer had simply taken the lowest electricity consumption for a month in a whole year and accordingly worked out the total production as per his formula and on the basis of the formula he worked out the alleged concealed income. There are certain important observations and findings of the Tribunal which are as under: 31. In the present case, the search was initiated on 17th March, 2006 in the residential and business premises of SRJ Peety Group, Jalna covering the premises of the assessee company as well. Prior to the search, the returns of income for the asst. yrs. 2000-01 to 2005-06 had already been filed under s. 139(1) of the Act accompanied by all requisite documents and proceeding under s. 143(1) of the Act stood completed. During the course of search no incriminating materials were found relating to aforesaid years which could have been added back in the proceedings under s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was very well placed before the authorities below in the director s report of each year. The same has not been disputed by the Revenue. The tax audit report also contained the unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO is not satisfied about the correctness or completeness of accounts of the assessee or where no method of accounting provided in sub-s. (1) or accounting standards as notified under sub-s. (2), have not been regularly followed by the assessee, the AO may make an assessment in the manner provided in s. 144. Sec. 145 gives the power to AO to reject the books in certain circumstances after considering the following aspects: (a) Whether the assessee has regularly employed a method of accounting? (b) Whether the annual profits can be properly deduced from the method employed? (c) Whether the accounts maintained are correct and complete? 35. Without prejudice to above, we find that having rejected the books of accounts of the assessee company for all the years under consideration, the AO devised a statistical formula on the basis of electricity consumption that was applied uniformly in order to work out certain production and resultant concealed income for each year under consideration. The AO could not substitute the same by cogent reasoning. He has simply taken the lowest electricity consumption for a month in the whole year and treated the production in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt dated 10-02-2014, in the case of the assessee and other companies by the Hon'ble High Court and there are categorical observations of their Lordships on the estimation of the production based on the consumption of the electricity which are as under: 4. In that regard, the Tribunal as also the Commissioner of Income Tax (Appeals) have concurrently found that the search was initiated on 17/03/2006 in the residential and business premises of SRJ Peety Steels Pvt. Ltd. Prior to the search, the returns of the income for the assessment year 2000-01 to 2005-06 had already been filed u/s. 139(1) of the Act, accompanies by all requisite documents and proceedings. The scrutiny was thus completed. During the course of search, no incriminating material was found relating to the said years, which could have been added in the proceedings u/s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was placed before the Authorities in the Director s Report of each year. The same has not been disputed by the Revenue. The Tax Audit Report also contains the unit production of each year, which was accepted year after year al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue after the search and seizure operations in the immediately preceding year, wherein during the course of search, certain loose sheets were found in the residence of the Director to make out case against the assessee for alleged suppression of production / sales. The Tribunal while deciding the appeal in M/s. SRJ Peety Steels Pvt. Ltd, in turn, relying on the ratio laid down by coordinate Bench of the Tribunal, deleted the addition made on account of alleged suppression of production / sales in entirety. The relevant observations of the Tribunal are as under:- 25. In the case of ACIT Vs. A.K. Alloys (P) Ltd. (supra) in which the additions were made by the A.O. for alleged suppression of production and investment in purchase of raw material relying on information received from Central Excise (Ludhiana) and when matter reached before the Tribunal and it is held as under: 10. The assessee had filed an appeal against the order of CIT Customs Excise, before the Customs, Excise Service Tax Appellate Tribunal with principal Bench at New Delhi (supra). The copy of the order of the Customs, Excise Service Tax Appellate Tribunal is placed on record by the learned A.R. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought on record to prove that the output had been cleared clandestinely. Further it has been held that there was no cogent evidence to show either suppression of purchase of input or removal of goods. In view of the aforesaid findings of the Customs, Excise Service Tax Appellate Tribunal in assessee's own case there is no merit in any addition being made in the hands of the assessee on account of the alleged suppression in production and also alleged investment in purchase of raw material. In view thereof, we hold that no addition on account of profit on the sale of unaccounted production or on account of unexplained investment merits to be made in the hands of the assessee. We are also in agreement with the observations of CIT (Appeals) in deleting the aforesaid addition as no independent evidence has been brought on record to establish that the assessee had, a) suppressed its production and; b) it made sale of its unaccounted production, outside the books of account. Upholding the order of the CIT (Appeals) we dismiss the ground Nos.1 and 2 raised by the Revenue. 26. In the case of ACIT Vs. Arora Alloys Ltd. (supra) the addition was made on the basis of elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said issue arises from Ground No. 9 in the A.Y. 2007-08 and Ground No. 7 in the A.Y. 2008-09 are on. As the assessee has succeeded on the main grounds as entire additions made by the Assessing Officer are deleted, the Ground No. 9 in the A.Y. 2007-08 and Ground No. 7 in the A.Y. 2008-09 become infructuous. 29. In Ground No. 10, the assessee has raised the objection for making the addition of ₹ 37,69,582/-. The said addition is made by the Ld. CIT(A). He has observed that there is an element of the undisclosed investment in respect of the undisclosed turnover which is estimated as an average undisclosed turnover of the half period of the earlier year under appeal. The Ld. CIT(A) has observed that the undisclosed sale for the earliest year under appeal are of ₹ 39,20,36,546/- and the said investment required for production out of books, therefore, worked out ₹ 37,69,582/-. In fact, the said addition is made by the Ld. CIT(A) as he has confirmed the alleged suppression of production/sales as held by the Assessing Officer. As the assessee has succeeded in getting the relief by deleting the entire additions towards alleged suppression of production and sales, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of the report of one Dr. Batra with regard to electric consumption and the Third Member of CESTAT had deleted the aforesaid addition made under the Excise law. Similarly, in the case of assessee before us, there is order of CCE, Aurangabad and of CESTAT and the Assessing Officer worked out the addition on the basis of erratic consumption of electricity as determined by CCE, Aurangabad. Following the same line of reasoning as in the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra), we find no merit in the addition made in the hands of the assessee on surmises. Both the learned Authorized Representative for the assessee and Ld. Special AR has raised identical arguments as in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and since the Tribunal has already decided the issue in M/s. SRJ Peety Steels Pvt. Ltd. (supra), the ratio of the said decision is applicable to the facts of the present case. However, additional production relating to the declaration made before the Settlement Commission is to be added in the hands of the assessee, as admitted by the learned Authorized Representative for the assessee. 42. Another objection raised by the Ld. Special AR before us during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso levied penalty. The assessee before the Assessing Officer admitted that the additional income in respect of the said clandestine removal of material without payment of Excise duty, is to be added in the hands of the assessee. All this information was available before the Assessing Officer during the course of assessment proceedings, but no other investigation or inquiry was made by the Assessing Officer while completing the assessment in the hands of the assessee. The Assessing Officer on the other hand, was of the view that the assessee had not correctly disclosed the production of ingots / billets. The basis for such assumption was the electricity consumption, for which the Assessing Officer placed reliance on the report of Dr. Batra and order of CCE, Aurangabad. The Assessing Officer applying the formula worked out the suppressed production and sales in the hands of the assessee. We in the paras hereinabove have already adjudicated the issue that no addition on account of suppressed production / sales on such account could be made in the hands of the assessee. The Ld. Special AR on the other hand, stressed that where the Assessing Officer had the information of alleged cland ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of alleged clandestine removal of material without payment of Excise duty or suppressed sales for the balance period, in the absence of any evidence found against the assessee for the balance period. 45. Another aspect of the issue is that though the factum of the assessee filing the petition before the Settlement Commission, was before the Assessing Officer, even additional income on such offer of settlement was offered by the assessee before the Assessing Officer, however, no further inquiry, investigation or action was taken by Assessing Officer in this regard. In the absence of the same, the issue raised in the present appeal is whether any extrapolation of sales for the balance year on the basis of evidence found for the part of the year is justified or not. The answer, in our opinion, has to be in negative. 46. The Ld. Special AR vehemently relied on the ratio laid down by the Tribunal in assessee s own case reported in 137 TTJ (Pune) 627, which in turn has been approved by the Hon ble Bombay High Court. It may be pointed out that the facts of the case before the Tribunal in assessment year 2006-07 are at variance. The addition in the hands of the assessee was made on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were found by the Income-tax Department pursuant to search and seizure action, which indicated clearance in sales, on the basis of which the additional income was added in the hands of the assessee. The said information was forwarded to the Central Excise Department pursuant to which, order levying additional Excise duty was passed by the Excise Commissioner. However, the Tribunal cancelled the Excise demand on the ground that there was no corroborative evidence of clandestine removal of material without payment of Excise duty was found from the possession of the assessee by the Excise authorities. 48. Following the same analogy of reasoning, where the evidence of clandestine removal of material without payment of Excise duty has been found by the Excise Department, in respect of sale of goods for a particular quantity and for a particular period, the same could not be relied upon as evidence, while extrapolating the sales and the additional income thereon in the hands of the assessee during the Income-tax proceedings. The Assessing Officer does not have any evidence for suppressed production and even after the order of Settlement Commission, the Assessing Officer had not inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence could be drawn against the assessee for extrapolating the same for full year and for the balance year and in other years, other than the year in which the said settlement was offered. In this regard, we find support from the ratio laid down by the Bangalore Bench of Tribunal in Anjaneya Brick Works vs. CIT (supra), wherein it has been held that mere existence of evidence of concealment in the next assessment year could not be the basis for estimating income in any other assessment years. 53. Further, before the Hon ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra), the issue was in relation to the evidence found of unaccounted sales for part of the period during the course of search. The Assessing Officer on the said basis assumed unaccounted sales during the entire year, which was deleted by the CIT(A) and the Tribunal. The Hon ble Delhi High Court observed that assumption of Assessing Officer may have perhaps been valid if the search had been conducted after the accounting year and the books of account had brought some discrepancy. 54. Similar proposition has been laid down by the Hon ble Bombay High Court in CIT Vs. C.J. Shah and Co. (supra). 55. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of justice, the said issue of extrapolation of suppressed sales was adjudicated by the Tribunal by observing as under:- 41. Before closing the issue, in the interest of justice, we would like to adjudicate the issue of extrapolation of suppressed sales on account of settlement petition made by the assessee. Admittedly, during the course of search and seizure operation on certain brokers, evidences of clandestine removal of material without payment of Excise duty, was found against the assessee. However, no search and seizure operation was carried out against the assessee, but the assessee claims that in order to buy peace of mind, it had declared the said amount by way of petition before the Settlement Commission. The said offer made by the assessee was accepted in toto. It may be noted that the Excise authorities have the power to re-visit the offer made by the assessee, in case, any adverse material is available against the person making the offer. It may also be noted that the Settlement accepted in the hands of the assessee is for the financial year and is not restricted to the number of days for which it has offered. In other words, once a person makes a sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landestine removal of material without payment of Excise duty has been made for assessment year 2008-09. The assessee had offered the additional income on account of such clandestine removal of goods before the Assessing Officer for assessment year 2007-08 and the same was the reason for reopening the assessment under section 148 of the Act. Once a particular fact was available with the Assessing Officer, which was taken note of and considered by him during the assessment proceedings, but the addition having been made on only on the issue of erratic consumption of electricity, which is the basis of order passed by CCE, Aurangabad, who was also in knowledge of the clandestine removal of material and the investigation carried out by the DGCEI and the petition before the Settlement Commission, even the Third Member of CESTAT was aware of all these proceedings, but since the settlement petition filed by the assessee had been accepted in toto by the Settlement Commission, no further addition could be made in the hands of the assessee on this ground, in the absence of any inquiry or investigation by the Assessing Officer. Accordingly, the reliance placed upon by the Ld. Special AR in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of such admitted clandestine removal of material without payment of Excise duty, by the assessee either before the Settlement Commission or before the Excise authorities, in the hands of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the Assessing Officer and where the Assessing Officer has failed to collect additional evidence, no addition can be made in the hands of the assessee, by way of extrapolation of sales for 300 days on account of any evidence found in any preceding or succeeding years. Further, no addition can be made in the hands of the assessee, where no petition has been filed by the assessee before the Settlement Commission in any of the respective years or before the Excise authorities. In the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there is no investigation by DGCEI and hence, no addition on account of extrapolation can be made, in the absence of any evidence found against the assessee. 60. Since we have deleted the addition in the hands of assessee on bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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