TMI Blog2016 (5) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... s without payment of Excise duty were detected and after recording of reasons for reopening under section 147 of the Act, notice under section 148 of the Act was issued and assessment competed, which is as per the provisions of the Act and hence valid. Further, the assessee had participated in assessment proceedings, though had not furnished complete details and / or produced books of account, no prejudice is caused to assessee. We dismiss the plea of assessee in this regard. Accordingly, we find no merit in the grounds of appeal raised by the assessee against re-assessment proceedings The admission of assessee before the Excise authorities that it had made purchases to the value of ₹ 73,84,150/- from its other concern for unaccounted production, we find merit in the claim of assessee that the payments were made to the suppliers of raw material after receiving the sale receipts. This is the plausible explanation and can be accepted in the hands of assessee since the assessee is making the said purchases of Ingots from its concern itself, which was controlled and run by him. However, in respect of other items required for manufacturing in addition to raw material, we find m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue raised by the assessee against invoking of the jurisdiction under section 147/148 of the Act in assessment year 2007-08. Since the facts in all the appeals are identical, we proceed to decide the present appeal referring to the facts in assessment year 2007-08. 4. The assessee in ITA No.121/PN/2012 has raised the following grounds of appeal :- 1. The reassessment order passed U/S 143(3) RWS 147 is bad in law and the same may please be cancelled. 2. The learned CIT(A) erred in not quashing assessment order passed u/s 143(3) RWS 147 of income Tax Act. It may please be held that assessment order (in absence of notice u/s 143(2) after filing Return in response to notice u/s 148) is void ab initio and the same may please be annulled. 3. The learned CIT (A) erred in not quashing notice u/s 148 issued by Assessing Officer. It may please be held that notice issued u/s 148 is bad in law and the same may please be quashed. 4. As the Assessment framed by Assessing Officer is also not on the basis of my HUF returns, as submitted in response to 148 for this reason also Assessment Order is bad in law. 5. Without prejudice to above grounds, the lower auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mend or alter any grounds of appeal. 6. The Ld. Authorized Representative for the assessee pointed out that the issue raised in the present set of cross appeals is squarely covered by the order of the Tribunal in the case of Shree Om Rolling Mills Pvt. Ltd. vs. Addl.CIT in ITA Nos.125 127/PN/2012 relating to assessment years 2007-08 2008-09 vide order dated 15.07.2015. The said decision of the Tribunal was in a Group of Steel Re-Rolling Mills at Jalna. 7. The Ld. Authorized Representative for the assessee, further, pointed out that in assessment year 2007-08 the first issue is with regard to the re-assessment proceedings initiated against the assessee under section 147/148 of the Act and in absence of any notice being issued under section 143(2) of the Act, the said reassessment proceedings were void. In this regard, elaborate submissions were made by the Ld. Authorized Representative for the assessee which we shall refer to while deciding the issue raised in the present cross appeal. 8. Briefly, in the facts of the case, the assessee had filed return of income declaring total income of ₹ 50,73,460/- on 31.10.2007. The return of income was processed under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various notices issued, the Counsel for the assessee attended but no books of accounts with any circumstantial evidences, purchase sale, bills including documents were produced for verification. The assessee was requested number of times for production of various details and other incomes shown in the books of accounts. But the assessee did not do so. Thereafter, the Karta of HUF of the assessee was issued summons on 02.12.2010 requiring attendance on 09.12.2010 and was specifically asked to produce the books of accounts, purchase sale, bills, vouchers, etc. for assessment years 2005-06 to 2007-08 and 2008-09. In response to the same, adjournment was sought on the plea that he was to go to Tirupati and the Directors were coming back on 16.12.2010. Accordingly, the assessee was granted time to appear on 18.12.2010. Since, it was time barring matter, the hearing was fixed on holiday also. On the said date, none attended nor any written communication was made. However, on 20.12.2010 the assessee had submitted a letter objecting to the issuance of notice under section 148 of the Act. The objection raised by the assessee was disposed off by the Assessing Officer vide speaking orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na. The Assessing Officer also referred to the admission of Shri Umesh Modi before the Central Excise Authorities that he had acted as a sub-broker for Shri Anil D Lingade, Proprietor of Anil Traders, Jalna and Shri Mukesh Gupta, Proprietor of R.J. Steel Traders, Navi Mumbai, while sourcing TMT bars. As noted by the Assessing Officer the said Shri Anil D. Lingade admitted that he acted as a broker for the nine manufacturers from Jalna which details are given in Para No. 2.2 of the assessment order. Then the Assessing Officer has discussed the modus operandi adopted by Shri Anil Lingade in Para No. 2.3 of the assessment order but as the name of the assessee is not there in nine listed parties, hence, we do not consider it necessary to go in the details of the same. The Assessing Officer has also referred to action taken by the Central Excise Authorities against one Shri Faruk Shaikh, who was also a broker from whom the name of the another broker Shri Pawan Garg of Jalna was revealed. 4.2 In sum and substance all the above referred information was on the basis of the investigation carried out by the Central Excise Authorities and they removed the TMT bars without payment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash and not accounted for. 10. The DGCEI had gathered the information vis- -vis quantity of TMT Bars in the hands of various re-rolling mills, which was confronted to the manufacturers of TMT bars, who in turn admitted that they had supplied TMT bars to the brokers without paying Excise duty and they also confirmed the modus operandi revealed by the brokers. The assessee before us i.e. Sanjaykumar Ramkishan Mantri (HUF), Jalna admitted to the manufacture of 748.620 MT of TMT bars, which were clandestinely removed without payment of Excise duty. The statement of Sanjaykumar Ramkishan Mantri (HUF) proprietor of DRL was recorded by DGCEI on 08.01.2007, in which he admitted that he was responsible for entire state of affairs of DRL and Nilesh Steel and Alloys Pvt. Ltd. He further admitted that DRL was engaged in the manufacture of TMT bars of various sizes from Billets. He also admitted the unaccounted clearance of TMT bars, for which no records were maintained and the payments were also received through cash. He further admitted to have cleared 730.035 MT through Shri Pawan Garg and 18.585 MT of TMT bar also through Anil Lingade and Shri Umesh Modi, without payment of Excise dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91 KWh/MT. Therefore, he adopted the electricity consumption in steel bar rolling mill at 188KWh/MT or the consumption of the assessee, if lower. As per the Assessing Officer, the adoption of the said rates became important in view of evasion of Excise duty by TMT bar manufacturers in Jalna cluster found by the DGCEI, which in turn, had been accepted by the manufacturers. 12. The Assessing Officer noted that the assessee had disclosed gross loss of ₹ 27,84,177/- from operations and profit before tax of ₹ 51,71,231/-. However, the assessee had also commission income of ₹ 1,43,91,499/-, profits from trading in MCX and NCDEX of ₹ 50,11,097/-, profits from commodity trading of ₹ 51,14,324/-, etc. aggregating to ₹ 1,95,05,413/-. In case these extraordinary item were removed, the Assessing Officer noted that there was a loss of ₹ 1,43,34,182/-. In other words the assessee was running the mill at a loss of ₹ 905/- for every MT of production. In view of the same, the Assessing Officer was of the view that it was necessary to adopt a fair value of electricity consumption in KWh/Mt and compute the suppressed production thereon. Since the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption required for producing TMT bars , at 188 electricity units per Metric Ton . The A.O. has reasonably considered the 25% allowance in respect of technology and machinery used in India by the appellant. (4) The A .O . has also pointed out that there is substantial variation in various months and in respect of various manufacturers of TMT bars in electricity consumption required for the quantum of goods produced, which is abnormal. ( 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 a ppellant. The facts before the Hon'ble ITAT while deciding the said cases were different 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than 4%, the actual gross profit rate was to be adopted and directions to that effect were given to the Assessing Officer. The CIT(A) further estimated the undisclosed investment in respect of undisclosed turnover and worked out the addition at ₹ 24,64,802/-. However, no addition was made in the hands of the assessee because of the addition on account of estimated GP rate in the preceding year i.e. assessment year 2006-07. The CIT(A) upheld the rejection of books of account under section 145 of the Act. The CIT(A) similarly upheld the addition on account of undisclosed investment in respect of undisclosed turnover to the extent of ₹ 9,06,132/-. 15. The next issue decided by the CIT(A) was the reopening of the assessment under section 147/148 of the Act. The CIT(A) vide para 10.2 10.3 held as under :- 10.2 I have carefully considered the facts of the case and rival contentions. The A.O., has received information from the Office of the Commissioner of Central Excise Customs, Aurangabad vide letter dated 29th March, 2010 that the appellant had indulged in manufacturing of finished goods and clandestine removal thereof without paying Excise Duty. The A .O. h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst issue raised by way of grounds of appeal No.1 to 3 is against the invoking of jurisdiction under section 147/148 of the Act. The relevant facts relating to the same are that the assessment in the hands of the assessee was completed under section 143(1) of the Act. Thereafter, the Assessing Officer received information of clandestine removal of TMT bars and evasion of excise duty and also unaccounted purchases of raw material and also sale of TMT bars as per the investigation and enquiries made by the DGCEI. The assessee had admitted to the said clandestine removal of goods in the statement recorded during investigation by DGCEI and also before the Settlement Commission of Customs and Excise Department and had paid the excise duty and the Settlement Commission had levied penalty in respect of the said clandestine sale out of books of account. The Assessing Officer, in such circumstances, was of the view that the income of the assessee had escaped assessment and consequentially reasons were recorded and notice under section 148 of the Act was issued on 30.03.2010. The assessee failed to furnish any return of income in response to notice under section 148 of the Act. The copy of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has also furnished on record the copy of the order-sheet entries perusal of which reflect that on 25.11.2010 the Counsel for the assessee attended and he was required to furnish the books of accounts and evidences in support thereof. On the next date of hearing i.e. 09.12.2010, the case was adjourned at the request of the assessee and final opportunity was given to the assessee on 28.12.2010 for 30.12.2010, on which date the Ld. Authorized Representative for the assessee attended and filed copy of Audit Report and Balance Sheet but no books of account were produced and the case was heard. The perusal of the assessment order reflects that the assessee failed to appear on various dates before the Assessing Officer and even summons were issued to the Karta of HUF for attendance on 09.12.2010 and he did not appear thereof. The matter was adjourned to 18.12.2010 but as late on as 20.12.2010, the assessee submitted the letter objecting to the issuance of notice under section 148 of the Act. The Assessing Officer has disposed off the objection raised by the assessee vide office speaking order dated 23.12.2010. Thereafter, on 28.12.2010, the assessee claims that both the directors had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued on 30.03.2010 with direction to the assessee to furnish the return of income within 30 days from the date of service of the notice. The assessee omitted on its part to furnish any return of income in response to the said notice within a period of 30 days or thereafter. In response to the notice under section 142(1) and 143(2) of the Act dated 16.08.2010, the assessee participated in the scrutiny assessment and filed the requisite details. At a very belated stage of proceedings on 10.11.2010, for the first time the assessee filed a simple letter stating that the original return of income filed by it should be treated as filed in response to notice under section 148 of the Act. The assessee has now raised a technical objection that after 10.11.2010 since no notice was issued under section 143(2) of the Act, the assessment framed by the Assessing Officer is bad in law. The objection of the assessee is required to be addressed keeping in mind the scheme of the Act. It would be pertinent to note that to give effect to the notice under section 148 of the Act and carry out assessment, mechanism provisions viz. 143(2), 142(1), 131, 133A, etc. of the Act come into play. These provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and non-est and there is no requirement to issue notice under section 143(2) of the Act. Accordingly, we hold that the reassessment completed in the case is valid and under the provisions of the Act. The Assessing Officer had issued requisite notices of hearing to the assessee and the assessee having participated in the said proceedings, cannot be aggrieved at this stage by the fact that no notices under section 143(2) of the Act was issued after alleged filing of the return of income belatedly. We have already held in the paras hereinabove that the said return of income filed by the assessee is invalid and nonest and hence, no requirement to issue notice under section 143(2) of the Act. 21. We find similar issue has been adjudicated by us in Chawara Educational Trust vs. ITO in ITA No.849/PN/2014, order dated 20.01.2016 wherein it was held as under :- 7. Since the assessee has questioned the legality of the assessment order itself which affects the jurisdiction and goes to the root of the matter, we consider it necessary to adjudicate the Grounds No.1 and 2 concerning this basic issue first. To begin with, the short question before us is whether non-issuance of notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, [* * *] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :] [ [underlined for emphasis by us] 7.3 On a combined reading of these aforesaid two provisions, we observe that when the Assessing Officer serves notice under S. 148 of the Act, the Assessee is required to file return in response thereto. The provisions of S. 148 seeks to treat the return filed in response to notice served under S. 148 as return filed under S. 139 of the Act. This is followed by notice under machinery provisions of S. 143(2) and S. 142(1) to enable the Assessing Officer to complete the assessment. We find that neither any return was filed under 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horized Representative for the assessee, the return was duly filed in response to section 148 or a valid under section 139 was in existence and on these facts the Hon ble Courts have held that issuance of notice u/s 143(2) is mandatory and cannot be disregarded and bypassed. 7.7 In the present case, as noted earlier, law itself does not oblige the Assessing Officer to issue notice u/s 143(2) in the absence of return u/s 139 or u/s 142(1). Concurrently, we notice that the impugned assessment was framed after proper opportunity were afforded to the Assessee by issuing notice under section 142(1) in sync with principles of natural justice. Therefore, we do not find any force in the contention of the Ld. Authorized Representative for the assessee that non issuance of notice under section 143(2) is fatal and has vitiated the re-assessment order and rendered it bad in law. To reiterate, we take note of the fact that the assessee has appeared before the Assessing Officer and was in acquiescence and privy to the re-assessment proceedings. Thus, interest of the Assessee is not jeopardized in any manner. Omission to serve or any defect in the service of the notice not statutorily requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years 2007 -08 2008-09 i.e. appeals filed by the assessee and ITA Nos.430 431/PN/2012, relating to assessment years 2007-08 2008-09 i.e. appeals filed by the Revenue other appeals, considered the issue at length vide order dated 15.07.2015 (supra) and held as under:- 54. The next issue is the working of the suppressed production and the application of GP rate of 4% on such suppressed production and third is the working capital required for investment in such suppressed production. We find that similar issue of addition on account suppressed production on account of erratic consumption of electricity arose before the Tribunal in the case of SRJ Peety Steel Pvt. Ltd. (supra). Though both the parties 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. 55. While arguing the appeals in the lead case of Shree Om Rolling Mills Pvt. Ltd. on 05.05.2015, the Ld. Special AR filed written Note and made elaborate submissions and took us through the page to page of Note and also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the TMT Bars manufacturers in Jalna cluster on the ground of variance in consumption of electricity versus production. The Assessing Officer also referred to the data collected in the cases of furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd. and others and relying on the addition made in the hands of M/s. SRJ Peety Steels Pvt. Ltd. (supra), in turn, on the basis of the order of CCE, Aurangabad, made additions in the hands of present set of assesses before us. 56. The Tribunal had elaborately considered all the aspects of addition in the hands of the furnace owners i.e. M/s. SRJ Peety Steels Pvt. Ltd., on the basis of erratic consumption of electricity, which in turn, was the basis for making the additions in the hands of the assessee therein by CCE, Aurangabad and vide order dated 16.01.2015 held that since the order of the CCE, Aurangabad has been overruled by the Third Member of CESTAT, there was no basis fo r addition in the hands of the assessee. The other aspects of the issue that the assessee therein had made the petition before Settlement Commission in respect of clandestine removal of material without payment of Excise duty, was also considered by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decisions relied on by both the Parties. The assessee is manufacturer of Ingots/Billets. So far as A.Y. 2007 -08 is concerned the original assessment of the assessee was completed u/s. 143(3) of the Act on 31-12-2009. While completing the assessment u/s. 143(3) of the Act, in the opinion of the Assessing Officer the electricity consumption shown by the assessee was at higher side as compared to the quantum of production declared by the assessee. The Assessing Officer, therefore, made the addition on the basis of the alleged suppression of the production/sales by the assessee as in his opinion the assessee should have declared or shown more production of the Ingot/Billets. Subsequently, on the basis of the information received from the office of the CCE, Aurangabad vide their letter dated 29-03-2010 as well as adjudication order of CCE quantifying the value of alleged suppressed production and alleged evasion of excise duty, the Asse ssing Officer initiated the re-assessment proceedings for A.Y. 2007 -08 against the assessee company u/s. 147 of the Act. In reasons recorded by the Assessing Officer while issuing the notice to the assessee company u/s. 147 for A.Y. 2007 -08 the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Central Excise Authorities and the proceeding before the Settlement Commission of Central Excise Custom, Mumbai. The investigation was carried out by Central Excise Authorities i.e. DGCEI, against few brokers/sub-brokers and those brokers gave the names of many companies who are in the manufacturing of Ingot/Billets and TMT Bars. As per the statement given before the Central Excise Authorities by those brokers as well as sub-brokers namely Shri Umesh Modi, Mumbai, Shri Anil D Lingade, Shri Mukesh Gupta it was admitted that they were involved in clearing the consignments from the factory on weighment slips only and no excise duty was paid and they were involved in providing fake trading bills and challans which accompanied the vehicles carrying those consignments. As per the modus operandi adopted by the brokers they used to recover the said fake trading bills and challans after the goods reached their destination. As noted by the Assessing Officer those brokers/sub-brokers also admitted that the entire evidence was destroyed by them and they used to get the commission of ₹ 100/- per MT. The Assessing Officer has discussed the information gathered by the DGCEI, Zonal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on the Electric Induction Furnace and as per the said article the power consumption in Induction Furnace is between 650 to 820 units per MT depending upon the input charge used. The Assessing Officer also referred to the Technical report of the IIT, which states that electricity requirement for manufacturing 1 MT of M.S. Ingots where melting scrap is used as an input, varies from 555 to 754 units and where Sponge Iron is used as an input, the electricity requirement varies from 815 to 1046 units. The Assessing Officer, therefore, came to the conclusion that the assessment framed by the Commissioner of Central Excise and Custom, Aurangabad in respect of the alleged suppression of production after considering the electricity consumption declared by the assessee and the production rate of units of electricity per metric ton adopted by the CCE, Aurangabad are very much reasonable, fair and justified and he adopted the same for the purpose of calculation of alleged unaccounted production of finished goods (Para No. 4.3 of the assessment order). 17. The Assessing Officer also rejected the books of account of the assessee u/s. 145(3) of the Income-tax Act by giving the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ratio laid down in R.A. Casting (supra). The relevant finding of the Tribunal in turn, incorporating the order of Third Member of CESTAT i n paras 19 to 19.4, which read as under:- 19. In sum and substance in both the assessment years the Assessing Officer has determined alleged suppression of the production/sales as determined the Commissioner of Central Excise and Custom, Aurangabad on the basis of power consumption. The copy of the adjudication order passed by the Commissioner of Central Excise and Custom and Service Tax, Aurangabad dated 28 -08-2009 (in short referred to as the CCE ) in the case of the assessee is placed at Page Nos. 122 to 174 of the P/B-I. The CCE, Aurangabad has observed that during the scrutiny of electricity bills, it was noticed that the substantial amount of expenditure has incurred by the assessee towards the cost of power consumption (Primary input). He has further observed that from the scrutiny of the various records, the cost of production is much more than cost of sale value, leaving no room for other major expenses like stores, wages, salaries, cost of maintenance etc. The Ld. Commissioner has referred to the study conducted by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 33,07,22,069/-. 19.2 The said order of the Ld. Commissioner was challenged before the CESTAT by filing the appeal u/ s. 35B(a) of the Central Excise Act, 1944. There was a difference of the opinion between the Ld. Members of the CESTAT, i.e. Ld. Vice -President and Ld. Technical Member and the matter was referred to the Ld. Third Member to resolve the following differences: a. Whether in view of the discussion in Para 1 to 31 and in view of the decision of the Tribunal in the case of R.A. Castings Pvt. Ltd. (supra) the impugned orders are to be set aside and the appeal allowed. b. Whether in view of the discussion in Para 32 to 68 above and in view of the Hon'ble Supreme Court s judgment in the case of Triveni Rubber Plastics (supra) and this Tribunal s decision in the case of Rattan Steels Works (supra), Nagpal Steel (supra) and Hans Castings Pvt. Ltd. (supra), the impugned order are to be upheld and all the appeals dismissed. 19.3 The Ld. Third Member of the CESTAT concurred with the finding of the Hon'ble Vice-President that the order passed by Ld. Commissioner of Central Excise and Custom, Aurangabad was not sustainable and has to be ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (125) E.LT. 1147, 20.3 After perusal of these reports, Tribunal opined that wide variations in the consumption electricity have been reported for the manufacture of one MT of steel ingot , and that this renders the norm of 1046 units adopted by the Revenue as arbitrary. After this finding, which is upheld by the Hon'ble Allahabad High Court and even SLP has been dismissed, there was no reason for the Commissioner in the instant cases to consider the norm of 1026 units allegedly as per report of Dr. Batra, for arriving at deemed production. Moreover, the trial run conducted by the department had proved that at that time power consumption was actually higher than that reported in Dr. Batra's report. 20.4 It is also seen that the allegations levelled in R,A, Casting (supra) were mainly- (i). Inordinately high electricity consumption without any explanation, (ii). Sale of Ingots at a huge loss over last 4-5 years, which was economically and commercially not possible, (iii). generation of fictitious profits in the balance sheets by depositing huge amount of cash with the stock brokers and receiving cheques of profits against the cash so deposited, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt-the test results as the basis to arrive at a norm, which can be adopted for future. It was further held that- 23. The Tribunal has consistently taken the view that wherever electricity consumption alone is adopted as the basis to raise demands, the order of the lower authorities have been held to be unsustainable in law and set aside* and the Revenue had been directed to carry out experiments in different factories on different dates to arrive at the average to be adopted as a norm, which can be followed thereafter and the Revenue in the present case not having conducted any experiment whatsoever cannot be permitted to justify the demands raised. It will be appropriate on the part of the Revenue to conduct experiments in the factory of the appellants and others and that too on different dates to adopt the test results as the basis to arrive at a norm, which can be adopted for future. The impugned demand based merely on assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. I also agree with the finding of the Hon'ble Vice President that in. any event, this additional material is also only of power consumption. 22. In written submissions of Revenue, it has also been contended that Report of JPC suggesting electricity consumption upto 1800 its PMT was for electric arc furnace and not inductionfurnace. However, the appellant has contended that productivity in. electric arc furnace is higher than induction furnace. In any event, in the Impugned Orders, there is no such reason to discard the report and in any event the letter of Mr. R.P. Varshney suggesting that electric consumption in induction furnace can be upto 1800 units per MT is also on record. Since, varying reports are on record, the ratio of R.A. Casting (sura) is squarely applicable. 23. Revenue, also relied On the judgment of the Hon'ble Supreme Court in the case of Melton India V/s. The Commissioner Trade Tax, U.P, - 2007-TIOL-14-SC-CT, the judgment of the Hon'ble Gujarat High Court in the case of Rajmoti Industries V/s. Joint Commissioner of Income Tax, 2014-TIOL-203-HC-AHM-IT, and an unreported order dtd. 28/9/2010 of Andhra Pradesh Sales Tax Tribunal (Visakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward before the Settlement Commission and paid the excise duty. Hence, the investigation of the DGCEI made against the brokers and sub-brokers referred by the Assessing Officer was also before the Ld. Commissioner, Aurangabad. On perusal of the assessment orders it is clear that both the assessments are merely based on the alleged suppression of the production by estimating certain consumption of electricity i.e. 1026 Units for manufacturing of 1 MT of Ingots and Billets. Moreover, even if in the A.Y. 2008 -09, the Assessing Officer has observed that the information received from the Central Excise Authorities has no bearing in the said order but on the perusal of the said order, it is seen that entire order is copy of order passed for the A.Y. 2007 -08. As vary basis of the assessment order i.e. the order of the Commissioner of Central Excise (CCE), Aurangabad has been set aside and cancelled by the CESTAT, in our opinion the assessment orders passed by the Assessing Officer and confirmed by the Ld. CIT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand. 59. The Tribunal thereafter, dealt wi th the arguments of Ld. Special AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the foundation for assessment does not exist. It was also noted by the Tribunal in para 21 that the investigation by the DGCEI and proceedings before the Settlement Commission were considered by the CCE in its adjudication order, which in turn, was the subject matter of CESTAT and the said order has been set - aside, hence, it was not necessary to deal with the decisions relied upon by the Ld. Special AR, which are in the context of admission of the Director in the course of investigation made by the DGCEI. 62. The second issue of maintaining of Form No.G-7 in respect of electricity consumption, was also before the CESTAT a nd the Tribunal overruled the arguments of the Ld. Special AR and upheld the arguments of learned Authorized Representative for the assessee that the order of CESTAT had to be applied. The relevant para of the Tribunal order reads as under:- 21. Though the Ld. Spl. AR has referred to and relied on the different judgments of the Hon'ble Supreme Court more particularly on the binding nature of the admission of any person-Sec. 17, Sec. 106 and Sec. 115 of the Indian Evidence Act etc. but the fact remains that in the case of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Tribunal and the order of the Tribunal is reported in 137 TTJ (Pune) 627. The Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) referred to the observations of Tribunal in earlier proceedings relating to assessment years 2000-01 to 2006-07 under section 153A r.w.s 143(3) of the Act and held that in the said case of search and seizure, it was also held that the consumption of electricity for the manufacture of mild steel, ingots / billets depending on various factors and there was no justification to charge the assessee that it had suppressed the production and indulged into unaccounted production. The order of the Tribunal was challenged by the Department before the Hon ble Bombay High Court and the Revenue s appeal was dismissed by common order dated 10.02.2014 in the case of assessee and other companies by the Hon ble Bombay High Court and there were observations on the estimation of production based on the consumption of electricity. The Tribunal while deciding the appeal of M/s. SRJ Peety Steels Pvt. Ltd. in this regard observed as under:- 22. We have already mentioned here-in-above that in the case of the assesse, the search and seizure operation was carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with the returns for each year: Asst. yr. Electricity consumption Production (MT) Yearly average consumption (units) 2000-01 24331059 18,524.239 1313 2001-02 25528565 17,010.558 1501 2002-03 31404354 19,709.654 1593 2003-04 31623843 20,396.313 1550 2004-05 43123824 23,240.189 1856 2005-06 62650888 29,582.434 2118 2006-07 70440580 36,017.983 1956 32. The matter of fluctuating consumption of electricity can by no means be said to be a finding of search since all details regarding electricity vis-a-vis production were before the Department. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption for the month in which electricity consumption was minimum. The method of computing the so-called suppressed production is not justified in absence of sound basis for same. 36. The consumption of the electricity for the manufacture of mild steel ingots/billets depends on various factors like quality of raw material which is the major input, voltage of the supply, power interruptions, mechanical and electrical breakdowns and the chemical composition of the liquid metal which has to be finally cast into ingots/billets. The AO failed to appreciate these facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacture of round/TMT bars and arrived at a conclusion that there is an excess consumption of electricity resulting in suppressed production and alleging that the assessee company has indulged in unaccounted production. 37. None of the evidence collected as a result of search or detected during the course of assessment pertains to the asst. yrs. 2000-01 to 2005-06. It is an accepted fact that each year of the assessment is independent and evidences found relating to asst. yr. 2006-07 cannot have an adverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of fluctuating electricity, therefore, was held to be one, and since details were made available to the Department, which could have been raised during the course of regular assessment and not u/s. 153A of the Act. The finding is that nothing incriminating was found in the course of search relating to these assessment years. The additions, therefore, were not corresponding to the seized material during the course of search. The relevant income tax returns, in normal course, are disclosing the particulars. They were already on record. The returns have been accepted. In such circumstances, the Tribunal, as also, the Commissioner of Income Tax (Appeals) have in their orders, held that there are several factors which have to be taken into consideration and while arriving at a conclusion with regard to the alleged production calculated on the basis of electricity consumption. Rejection of books for these years only on the ground that there has been divergence in the consumption of electricity, therefore, was held not justified. 24. Ld. Spl. AR for the Revenue argues that the said observations are made in the context of the assessment framed in consequence of search and sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that there is nothing on record to show that high power connection supported by evidence was made on a particular date and that resulted in higher amount of production. It was further observed by the Customs, Excise Service Tax Appellate Tribunal vi de para 4.2 that So far as the production quantum is concerned, there is also no evidence on record to show that the authorities intervened lawfully recording the output in the presence of witness. The Customs, Excise Service Tax Appellate Tribunal held that therefore, a hypothetical case appears to have been made by Revenue in excessive exercise of its jurisdiction to the detriment of justice. The Customs, Excise Service Tax Appellate Tribunal further considered the retraction statement of the Director of the assessee company and vide para 6 held as under: 6. We would have certainly come to the rescue of Revenue had the statement been recorded in a manner known to law and cogent evidence had been brought to record to prove output cleared clandestinely. No cogent evidence is on record to show either suppression of purchase of input or clandestine removal of goods in fool proof manner known to law for which, it can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) allowed the assessee s appeal. The Revenue challenged the order of Ld. CIT(A) before the Tribunal. It was held that there was no justification to support the said addition and the Revenue s appeal was dismissed. In the light of our above discussion, we are of the opinion that the additions made by the Assessing Officer and confirmed by Ld. CIT(A) in both the assessment years based on the order passed by the CCE, Aurangabad as well as on the basis of consumption of the electricity used in manufacturing of Ingots/Billets are not sustainable. We, accordingly, delete the additions made towards the alleged suppression of production and sales at entirety and allow the Ground Nos. 3, 4, 5, 6 8 in the A.Y. 2007 -08 and Ground Nos. 2,3,4 6 in the A.Y. 2008 -09. 66. The Tribunal thereafter, held that there was no merit in the rejection of books of account and application of gross profit to determine the income in the hands of the assessee. The Tribunal also gave a finding that since the additions made in the hands of the assessee have been deleted, there was no merit in any addition on account of undisclosed investment in respect of the undisclosed turnover. The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed the appeal of the Revenue against the estimation of gross profit by the CIT(A) observing as under:- 31. We have heard the parties. The main grievance of the Revenue is against the estimation of GP by Ld. CIT(A). We have already allowed the grounds taken by the assessee on the alleged suppression of the production/sales. As the assessee has succeeded on the basic additions, the grounds taken by the Revenue do not survive as the entire additions are deleted in both the assessment years by allowing the grounds taken by the assessee. Accordingly, all the grounds of the Revenue in both appeals are dismissed. 68. The plea of the learned Authorized Representative for the assessee before us was that the issue raised in the present appeal is squarely covered by the ratio laid down in M/s. SRJ Peety Steels Pvt. Ltd. (supra). Since the basis for addition was the consumption of electricity, though on different ground i.e. consumption of electricity as per US standard. However, the Ld. Special AR stressed that the issue raised in the present appeal was at variance. Vide his written submissions, he has raised identical grounds of appeal and had elaborately took us through v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of both the Authorized Representatives. We have by an order of even date held that there is no merit in the said Miscellaneous Application filed by the Revenue and no remedy is available to the Revenue under section 254(2) of the Act. In view thereof, the next objection of the Ld. Special AR for not relying on the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra) also stands dismissed. 71. Further, the Tribunal in the case of another Rolling Mills i.e. Mahaveer Steel Re-Rolling Mills Vs. ACIT in ITA Nos.1072 to 1076/PN /2012 and ACIT Vs. Mahaveer Steel Re-Rolling Mills in ITA Nos.1446 to 1450/PN/2012, relating to assessment years 2004-05 to 2008-09 vide order dated 05.03.2015 had applied the ratio laid down by the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and held that the addition made towards alleged suppressed production and sales on the basis of consumption of electricity was deleted. In our opinion, the addition made by the Assessing Officer by relying on the consumption of electricity under US standards, by no stretch of imagination, can be applied under Indian conditions, in the absence of any finding that the conditions for carrying out manufacturing activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed reliance on the results of electricity consumption under US standards against which, handicap of 25% was given. 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 account of such formula 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 clandestine removal of material without payment of Excise duty and also because of the admission of the assessee before the Assessing Officer, the sales for the period of 300 days should be extrapolated in the hands of the assessee. He stressed that even where the evidence of clandestine removal of material without payment of Excise duty and suppression of income was found for the part of the year, then the Assessing Officer can estimate the additional income for whole of the year. Merely because the Assessing Officer had adopted another methodology of suppression, the addition in the hands of the assessee could be sustained on the basis of extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 75. 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 the basis of search and seizure action carried out by the Income-tax Department and the documents found during the course of search, which were admitted by the assessee to reflect suppression of sales. On the basis of aforesaid documents, the income for the year was extrapolated, which order of the Tribunal was approved by the Hon ble Bombay High Court. However, for the year under consideration, there was no search and seizure operation carried out by the Income-tax Department against the assessee and also no investigation or inquiry was made by the Assessing Officer, as stated earlier. In the absence of any evidence collected agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Incometax 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 investigated or brought any material on record establishing suppressed production and / or its sale outside the books of account. 78. The Ld. Special AR time and again stressed that the assessee had made admission before the Assessing Officer and this was the evidence available with the Assessing Officer. The alleged admission before the Assessing Officer was only by way of the additional income offered by the assessee, which was relatable to the clandestine removal of material without payment of Excise duty admitted before the DGCEI and offered by way of petition before the Settlement Commission. No statement of Directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 83. Similar proposition has been laid down by the Hon ble Bombay High Court in CIT Vs. C.J. Shah and Co. (supra). 84. Further, the Bilaspur Bench of the Tribunal in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra) decided similar issue of the information available with the Central Excise Department, wherein unaccounted sales was estimated for 56 days and the Assessing Officer estimated the sales for the remaining period. The addition was deleted in the hands of the assessee and was restricted to the income declared by the assessee on the basis of papers seized, for which the assessee had filed a petition before the Settlement Commission and income on that account was declared by the assessee. The Tribunal held that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 settlement petition for a particular year on account of the evidence found for part of the period and once the petition is accepted in the hands of the assessee, no further addition can be made on account of alleged clandestine removal of goods or suppressed sales, in the absence of evidence for the balance period. The above said ratios have been laid down in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra), Hon ble Bombay High Court in CIT Vs. C.J. Shah Co. (supra), Hon ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra). The Ld. Special AR had placed reliance on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis 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 assessee s own case reported in 137 TTJ 627 [Pune] is misplaced and there is no merit in the arguments of the Ld. Special AR in this regard. 87. Another plea raised by the Ld. Special AR was that income could be estimated/ taxed on the theory of preponderance, in turn relying on the ratio laid down by the apex court in Sumati Dayal Vs. CIT (supra) and Collector of Customs Madras and others Vs. D. Bhoormull (supra), which was also relied upon by the Ld. Special AR in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and the same had been considered by the Tribunal. During the course of hearing, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 89. Since we have deleted the addition in the hands of assessee on both accounts i.e. addition made on account of erratic consumption of electricity and addition proposed on the basis of evidence found for the part of the year of clandestine removal of material without payment of Excise duty, next addition made in the hands of the assessee i.e. alleged investment in the purchases for effecting such sales which goods have been clandestinely removed, is not sustainable. Accordingly, we hold that no addition can be made in the hands of the assessee on account of alleged investment in purchases under section 69C of the Act. 24. Thereafter, Corrigendum order was passed by the Tribunal substituting para 88 of the Tribunal and it was held as under:- 3. On perusal of the record, we find that by an error, the findings of the Tribunal in para 88 with spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we direct the Assessing Officer to verify from the records for the respective years and include in the hands of assessee, the additional income @ 4% or actual G.P. rate declared by the assessee for that year, whichever is higher, on value of such admitted clandestine removal of material without payment of Excise duty, by the assessee before the Excise authorities. Thus, the assessee is directed to file the requisite details of proceedings before the Excise authorities, before the Assessing Officer in order to compute the additional income in the hands of assessee in the respective years. 26. Another aspect is to be seen that the year under appeal i.e. assessment year 2007-08 is first year in which the assessee had admitted to clandestine removal of goods without payment of Excise duty. Further, the assessee had also admitted that he was the Director of Nilesh Steel and Alloys Pvt. Ltd., from which it had made cash purchases of Ingots for the purpose of TMT bars or CTD bars. The admission of assessee in this regard was cash equivalent to 497 MT for the value of ₹ 73,84,150/-. The said amount was treated as deemed income of the assessee under section 69C of the Act. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line with the admission made by the assessee before the Excise authorities of clandestine removal of goods without payment of Excise duty by applying GP rate @ 4% or higher, if declared by assessee. We also uphold the addition of ₹ 9,06,132/-. The other grounds of appeal raised by the assessee regarding charging of interest under section 234A, 234B and 234C of the Act are consequential in nature and hence, the said grounds of appeal are dismissed. The grounds of appeal raised by the assessee are partly allowed. 28. Now, coming to the appeal filed by the Revenue in ITA No. 684/PN/2012. 29. The issue in the present appeal is against the quantification of suppressed production and application of net profit rate of 4% and the addition under section 69C of the Act being summed up with the issue of suppressed production. The grounds of appeal No.1 to 3 are linked with the issue decided in the case of assessee and following the same ratio, grounds of appeal are partly allowed. 30. Now, coming to the cross appeals in ITA Nos.120/PN/2012 and 685/PN/2012, relating to assessment year 2008-09. 31. In this appeal, the assessee has not pressed the grounds of appeal No.1 and 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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