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2016 (5) TMI 409 - ITAT PUNE

2016 (5) TMI 409 - ITAT PUNE - TMI - Reopening of assessment - estimation of income in the hands of assessee on account of alleged suppression of production on account of variation in consumption of electricity - assessee Karta, HUF had admitted to the clandestine removal of goods without payment of Excise duty and had paid additional Excise duty on the said amount -

Held that:- The assessee had shown total disregard to the provisions of the Act. As against the notice issued under se .....

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es was taken against the sole proprietary concern in which clandestine removal of goods 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 c .....

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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 merit in the order of CIT(A) in working out the addition to the extent of ₹ 9,06,132/- and the same is upheld. But no such separate addition was made by the Assessing Officer since the addition was mad .....

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itional 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. - Decided partly in favour of asse .....

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007-08 and 2008-09 dated 04.01.2012 against the respective orders passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ) and section 143(3) of the Act for assessment year 2008-09. Further, cross appeals have been filed against the order of the CIT(A) dated 28.05.2012 relating to assessment year 2009-10 against the order passed under section 143(3) of the Act. 2. All the three cross appeals relating to the same assessee on similar issue were heard together and are .....

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nds 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. I .....

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to above grounds, the lower authorities were not justified in holding that there is suppressed production and they have erred in estimating suppressed production based on electricity units consumption basis. 7. The learned CIT (A) has erred in confirming Assessing Officer's estimate of alleged suppressed production without Assessing Officer granting the copies material relied by Assessing Officer and opportunity to examine the parties. 8. Without prejudice to above grounds, the learned CIT(A .....

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t craves leave to add, alter, amend, modify and/or withdraw any of the ground/s during the course of hearing as occasion may demand. 12. Appellant prays for just and equitable relief. 5. The Revenue in ITA No.684/PN/2012 has raised the following grounds of appeal :- 1. Whether on the facts and in the circumstances of the case the CIT(A) was justified in quantifying the suppressed production @ 4% even after accepting the fact that the assessee indulged in clandestine removal of goods without paym .....

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up with the issue of suppressed production? 4. The order of the AO be restored and that of the CIT(A) be vacated. 5. The appellant craves leave to add, amend 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 & .....

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ate 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 section 143(1) of the Act. The assessee was engaged in the manufacture of TMT / CTD Bars. Information was received from the office of Commissioner of Centr .....

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ted by the Directorate General of Central Excise Intelligence (DGCEI) confessed and admitted to clandestine removal of finished products without Excise cover before the Excise authorities. The assessee in this regard had made a petition before the Central Excise & Customs Settlement Commission for waiver of penalty, interest and prosecution. The petition was admitted and disposed off and the assessee made the payment of Excise duty evaded in accordance with notices issued by DGCEI. The asses .....

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/- equivalent to 790 MT of goods removed without payment of Excise duty. In view of new information brought on record, the Assessing Officer was of the view that sufficient reasons existed for prima facie formation of belief that the income of assessee had escaped assessment. Therefore, after recording reasons for reopening the assessment under section 147 of the Act, the Assessing Officer issued notice under section 148 of the Act to the assessee on 30.03.2010 directing the assessee to file ret .....

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s 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 .....

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he assessee furnished a letter stating that both the Directors attended the office of the Assessing Officer but the Assessing Officer was not in his office. The allegations were replied to by the Assessing Officer vide letter dated 28.12.2010. Following the principle of natural justice, a final opportunity was given to the assessee to appear on or before 30th December, 2010. On this date, the Counsel for the assessee attended and furnished copy of Audit Report and Balance Sheet. The assessment t .....

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bars. We find that similar action of DGCEI was referred to by the Tribunal in the related case of the assessee i.e. in M/s. SRJ Peety Steels Pvt. Ltd. Vs. the Additional CIT in ITA Nos.123 & 124/PN/2012 and in Cross appeals filed by the Revenue in ITA Nos.435 & 436/PN/2012 relating to assessment years 2007-08 and 2008-09 vide order dated 16.01.2015. The factual aspects of the intelligence report of the DGCEI have been referred to by the Tribunal, which are the basis for carrying on the .....

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MT) Bars, that they were involved in clandestine clearance of finished products through a broker, Shri Umesh Modi, Mumbai. As noted by the Assessing Officer searches were conducted by the DGCEI on 18-12-2006 and various incriminating documents were recovered which indicated clandestine removal of goods by manufacturers of TMT bars by manufacturers located at Jalna. The Assessing Officer also referred to the admission of Shri Umesh Modi before the Central Excise Authorities that he had acted as a .....

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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 Author .....

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ithout paying excise duty and they confirmed the modus operandi as narrated by Shri Faruk Shaikh and Shri Pawan Garg. The Assessing Officer has noted that consequent to admission by the suppliers of unaccounted TMT bars, they also admitted that they had manufactured these TMT bars from raw material viz., Ingots and Billets from unaccounted receipt of raw material. As observed by the Assessing Officer the suppliers identified the Ingots/Billets from alleged unaccounted receipts of raw material. T .....

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gainst some brokers and sub-brokers the Central Excise Department issued Show Cause Notices to the assessee and other manufactures whose names were revealed during investigation for evasion of excise duty. The assessee admitted to clandestine removal of finished products to extent of 288.50 MT without payment of excise duty. The Assessing Officer has observed that the assessee had made a petition before the Central Excise and Customs Settlement Commission ( herein after referred to as the Settle .....

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ered the information vis-à-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 Exci .....

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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 duty and he agreed to make payment of ₹ 24,85,884/- being the Excise duty on clandestine sales made by him. He further agreed that raw material procured from sister concern was cleared without payment of Excise duty. Final show cause notice was issued by Excise authorities for production and removal for value of ₹ 60,87,450/- in assessme .....

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T bars from ingots or billets by the Re-Rolling Mills in para 5.1 observed that the variable electricity consumption is important in arriving at the actual production of TMT / CTD bars. The Assessing Officer referred to the data for electricity consumption for steel bar mills in USA, where the average consumption of electricity in bar mills was 132 - 165 KWh/tonne after allowing for losses as irretrievable and as per the Assessing Officer, the average consumption was 150 KWh/MT. The Assessing Of .....

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er and above the US cost observed that the range of electricity consumption would be in the range of 169 KWh/MT to 206 KWh/MT i.e. average of 188KWh/MT. The Assessing Officer n oted the consumption of various manufacturers in Jalna cluster during the previous years relevant to assessment years 2006-07 to 2008-09 and was of the view that the average rate of electricity consumption according to international standards after giving handicap of 25% was 188KWh/MT and the average minimum consumption i .....

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8377; 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 .....

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However, addition was made on account of admission of the assessee before the excise authorities that he had purchased ingots in cash equal to 497 MT for a value of ₹ 73,84,150/- from Nilesh Steel and Alloys Pvt. Ltd. for unaccounted production respectively. Since the assessee was found to have incurred expenses for which no explanation was offered, the said amount was treated as deemed income of the assessee under section 69C of the Act against which no deduction under any head of income .....

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o the addition made on account of suppressed production / sales of TMT bars on the basis of electricity unit consumption, the CIT(A) held as under:- 7.2 I have carefully considered the facts of the case and the rival contentions raised by the appellant in para 7.1 above and raised by the A.O. mentioned in para-5 above. On perusal of the same, it has been observed as under - (1) The appellant has clandestinely removed TMT bars and has evaded Excise Duty and has not accounted for the said purchase .....

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s. (3) The A.O. has reasonably estimated, after considering various reports and studies in-respect of electricity consumption 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 .....

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T. 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 relianc .....

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nts are regularly maintained and audited cannot be accepted in view of the clandestine removal of goods and the unaccounted purchases and sales admitted by the appellant and also in view of various reasons mentioned by the A.O. in the assessment order. 7.3 In view of the above facts, observations and discussion and also in view of various reasons mentioned by the A.O. in the assessment order, I am of the considered view that the A.O. is justified in arriving at the suppressed production/sale of .....

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in turn, relying on the ratio laid down by the Tribunal in ACIT Vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune), wherein it was held that the gross profit in respect of undisclosed production sold could only be taxed. However, in view of the admission of clandestine removal of goods and unaccounted purchase of raw materials and sale of finished goods admitted by the assessee, the gross profit for manufacture of TMT bars was estimated at the rate of 4%. F .....

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ated 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 .....

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se Intelligence and the appellant has also accepted the said fact in statement recorded in investigation conducted by DGCEI and has also accepted the same in proceedings before the Settlement Commission. The A.O. has applied his mind to the above facts of the case. The A.O. has also noticed that the quantity of production shown by the appellant is on lower side and not commensurate with the electricity units consumed. The contention of the appellant that the A.O. has acted on the basis of inform .....

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d his own satisfaction that the income has escaped assessment. (iv) The ratio laid down by the decision in the case of Sir Shadilal Sugar Mill decided by the Hon'ble Apex Court is totally different and is not relevant in the case of the appellant. 10.3 In view of the above facts and discussion and also in view of reasons mentioned by the A.O., I am of the considered view that the A.O. is justified in reopening the assessment of the earlier years. The fourth issue is, therefore, decided again .....

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Books filed by the assessee from day to day and the issue decided by the Tribunal in the case of Re-Rolling Mills, we proceed to adjudicate the grounds of appeal raised in the present appeal. 17. The first 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 Of .....

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espect 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 notice issued under section 148 of the Act in the name of proprietary concern of the assessee HUF .....

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re placed at pages 57 to 63 of the Paper Book. The assessee was also informed that the jurisdiction over the case has been transferred by letter dated 16.08.2010. In reply the assessee furnished the information vide letter dated 25.08.2010, copy of which is placed at pages 67 to 120 of the Paper Book and thereafter on 04.11.2010 further information was furnished by the assessee to the Assessing Officer along with Annexures, copy of which is placed at pages 122 to 133 of the Paper Book. The subje .....

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e of M/s Dhanlaxmi Re-Rolling Mills. The assessee filed extensive reply to both these notices issued in the name of proprietary concern. The Assessing Officer directed for production of books of account along with supporting vouchers, which were not produced on several dates of hearing. Thereafter, on 10.11.2010, the assessee informed the Assessing Officer that the original return of income filed under section 139(1) of the Act on 30.01.2007 may please be treated as return of income filed in res .....

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unts 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 be .....

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attended the office but the Assessing Officer was not there, which was replied by the Assessing Officer by letter dated 28.12.2010 itself. On 30.12.2010, Counsel for the assessee attended and furnished copy of the Balance Sheet but did not produce the books of account and the assessment was completed on the basis of evidence available on record. 18. The objections of the assessee before us are that the assessee is Shri Sanjaykumar R. Mantri (HUF) but the notice under section 148 of the Act was .....

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against the sole proprietary concern of assessee, hence, notice for re-assessment was issued in the name of assessee. Further, even the notices under section 143(2) and 142(1) of the Act along with questionnaire were issued in the name of sole proprietary concern and the assessee had duly participated in assessment proceedings and filed requisite details on different dates of hearing. Now, the objection raised by the assessee against the issue of notice in the name of sole proprietary concern, .....

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ecisions of various High Courts for the proposition that after the re-assessment proceedings initiated, then there is a requirement to issue notice under section 143(2) of the Act after concerned person has filed return of income. In this regard, we would again look at the dates of events which we have already referred in paras hereinabove. The statutory notice under section 148 of the Act was issued on 30.03.2010 with direction to the assessee to furnish the return of income within 30 days from .....

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led 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, m .....

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tory formalities of issuance of notice to redone. If such plea is accepted, it will call the entire machinery at the whims of assessee leading to incurable absurdum. It would be relevant to note in this context here that the assessment proceedings for the year under consideration came into motion on 30.03.2010 gets time barred by statutory limitation on 30.12.2010. In the gamut of the entire proceedings, the assessee claims that it had filed the return of income on 10.11.2010 which should be rec .....

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isions, the whole machinery of assessment fails and the assessee cannot be allowed to do so. On the one hand, the assessee furnishes all the information for scrutiny assessment but fails to comply with the direction issued by the Assessing Officer under section 148 of the Act on 30.03.2010 to file return of income within period of 30 days. The assessee does not file any return of income. Even thereafter, scrutiny assessment proceedings were taken up and the assessee had participated in the scrut .....

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on-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 h .....

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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 under section 143(2) will invalidate the re-assessment order framed under section 143(3) r.w.s. 147 of the Act in the facts of the case set out or not. We notice that the return of income filed dated 09.03.2007 is not a return under section 139(1) or under section 139(4) of the Act. The return has been filed beyond .....

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tion 142, the Assessing Officer shall,- (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: [Provided .....

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nce on which the assessee may rely in support of the return: [Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.]] 7.2 It is also appropriate to simultaneously read the relevant provisions of section 148 also in this context which is read as under :- [Issue of notice where income has escaped assessment. 148. [(1)] Before making the assessment, reassessment or recomputation u .....

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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. .....

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the requirements of section 147/148 are duly met with, the provisions of section 143(2) are rendered procedural and does not affect the validity of the assessment. As noted above, return filed in response to notice under section 148 is deemed to return filed under section 139 and all the provisions of the Act shall apply accordingly. As a consequence, the notice for assessment has to be necessarily issued as mandated under section 143(2) of the Act in so far as the return filed in response to S .....

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mit and is thus nonest in the eyes of law. The assessee has neither filed any return in response to notice u/s 148 nor has requested the Assessing Officer to treat the impugned nonest return to be taken as filed against notice under section 148 of the Act. Therefore, impugned nonest return did not get validated at any stage. 7.5 Section 143(2) of the Act mandates issuance of notice under this section only when the return is filed u/s 139 or u/s 142(1) of the Act. The return filed in response to .....

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Hotel Blue Moon (supra) and all other decisions relied upon by the Ld. Authorized 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 1 .....

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he 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 required in the facts of the case will not, in our view, impinge upon the legality of impugned re-assessment order. 22. We are in agreement with the proposition raised by the Ld. Authorized Representative for the assessee that in case r .....

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30 days and assessment was getting time barred on 30.12.2010, the assessee furnished the alleged return of income on 10.11.2010 which is not maintainable and the same is rejected being non-est. Further, we also dismiss the plea of assessee that reassessment is bad in law as the notice under section 148 of the Act was not issued in name of assessee but its sole proprietary concern. The action by Excise authorities was taken against the sole proprietary concern in which clandestine removal of goo .....

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nd no merit in the grounds of appeal raised by the assessee against re-assessment proceedings completed under section 147 / 148 of the Act. Thus, the grounds of appeal No.1 to 3 are dismissed. 23. Now, coming to the merits of the case. We find that the identical issue of estimation of income in the hands of assessee on account of alleged suppression of production on account of variation in consumption of electricity arose vide bunch of appeals decided by the Tribunal of both furnace cases and Re .....

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he 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. .....

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ed by the Ld. Special AR and on comparison of the said written Note with the written Note dated 05.11.2014 filed by him before the Tribunal in the case of M/s. SRJ Peety Steels Pvt. Ltd., (supra) which is a sister concern of Shree Om Rolling Mills Pvt. Ltd., we find that the same are identical. We called for appeal folder of M/s. SRJ Peety Steels Pvt. Ltd. (supra) and found that the arguments raised by the Ld. Special AR in the case of the present assessee before us were repeated by the Ld. Spec .....

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rs is carried out by Shree Om Rolling Mills Pvt. Ltd. by using 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 dele ted the addition made in the hands of respective furnace cases. However, in the case .....

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f Rolling Mills i.e. in the hands of the assessee before us was of the view that because of erratic consumption of electricity, in turn, relying on the data of consumption of electricity as per US standards, came to the conclusion that there was suppression of production 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 Pee .....

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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 Tribunal and in the absence of any inquiry / .....

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held that no addition is warranted in the hands of the assessee. The issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. was summarized under para 9, which reads as under:- 9. At this stage we are not considering the appeals filed by the Revenue for the reason that those appeals are against the finding 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 gro .....

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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. 57. 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 to 24 o .....

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s 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 In .....

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147 for A.Y. 2007 -08 the Assessing Officer gave reference of the communication and order of the CCE Aurangabad received from the Central Excise office at Aurangabad. 14. The Assessing Officer has also referred to one matter in respect of the action conducted by DGCE (Intelligence) against the few brokers and sub-brokers who were involved in the trading into the Ingot/Billets and TMT Bars. The Assessing Officer also referred to the petition filed by the assessee before the Central Excise and Cus .....

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y 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 .....

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years after the assessments in consequence of search and seizure action u/s. 132(1) of the Act were completed. 15. It is also to be taken note of the fact that even for the A.Ys. 2007-08 and 2008-09, no independent investigation or any enquiry is made by the Assessing Officer or any other Income Tax Authorities. In the assessment order the Assessing Officer has placed his reliance only on the information received from the Central Excise Authorities and the proceeding before the Settlement Commis .....

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ignments 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 ge .....

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TMT Bars were based in Jalna and the assessee is one of them. As per the investigation done by the Central Excise Authorities, the assessee who is manufacturing of Ingots/Billets supplied 288.500 MT. to Shri Om Rolling Mills Pvt. Ltd. which is engaged in the manufacturing of TMT Bars. The Assessing Officer also referred to a statement of Shri Surendra S. Peety, Managing Director of the assessee recorded on 12-01-2007, by the DGCEI who allegedly admitted that the goods supplied to Shri Om Rollin .....

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eclaration 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 a .....

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the internet which 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 .....

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ccounted 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 that the assessee has not given the true and correct picture. The Assessing Officer adopted the suppression of production determined by the CCE, Aurangabad as per his adjudication order and held that the assessee has suppressed the production and accordingly, worked the suppressed producti .....

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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 e .....

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ined by the CCE, Aurangabad on the basis of erratic consumption of electricity. The basis of the order of CCE, Aurangabad was the report of Dr. N.K. Batra, Professor of IIT, Kanpur. The Third Member of CESTAT in group of cases of furna ce owners held that the order of CCE, Aurangabad was not sustainable and had to be cancelled in turn, relying on 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 .....

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22 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 r .....

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anufacture of 1 MT of MS Ingots varies from 1454 to 1856 units. 19.1 He relying on the Technical report of IIT, Kanpur the Ld. Commissioner observed that on calculating the production of M.S. Ingot/Billets on the basis of consumption of 1026 units (Maximum Limit) of electricity for per MT of MS Ingots produced, it is noticed that there is a huge difference in the actual/normal production and the recorded figures in the assessee s records. The Ld. CCE accordingly, observed that the assessee has w .....

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n 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 opinio n 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 .....

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as 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 .....

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order passed by Ld. Commissioner of Central Excise and Custom, Aurangabad was not sustainable and has to be cancelled. The operative part of the order of the Third Member is as under: 20. It is also seen that the Hon'ble Vice President correctly opined that the judgment in R.A. Casting (supra) is squarely applicable in the facts of the instant appeals. In R.A, Casting the electricity consumption was 2072 to 2443 units per MT, which is higher than the average electricity consumption in the i .....

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tor, 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 .....

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rt; (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 as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 units to 820 units/MT as per the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 851 units/MT in the case of Nagpal Steel v. CCE, Chandigarh reported in 2000 (125) E.LT. 1147, 20.3 After perusal of these reports, Tribunal opined that .....

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un 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 amou .....

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thereof in the statutory records; (ii). Utilization of such raw material for clandestine manufacture of finished goods; (iii). Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, .discrepancy in the stock of raw materials and final products; (iv). Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods .....

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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 hig .....

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ppellants 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 .....

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assumptions and presumptions cannot, therefore, be sustained nor could be justified both on facts and in law. 24. The law is well settled that in every case of alleged clandestine removal, the onus is on the Revenue to prove what it alleges with positive and concrete evidence. In the absence of any positive evidence brought by the Revenue to discharge its onus, the impugned order cannot be sustained." 20.8 In the present appeals, none of the so called other evidences referred in the impugn .....

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nue that 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 th .....

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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 power consumption for manufacturing one MT of Ingots has reduced in factories of all the appellants, I am of the view that it cannot be-.a" basis to sustain the findings in the impugned Orders by assuming that there could not be any reason for lower consumption of electricity during the subsequent .....

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re 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 .....

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years 2001-02 and 2002-03.This was followed by the Sales Tax Tribunal in the order cited by Revenue. In the case of Rajmoti Industries, facts of the case are that for the assessment year 2005-06, the Assessing Officer rejected the books of accounts of the assessee and made various additions, not only for the reason of unexplained wide fluctuations in the productivity as compared to that in A.Y. 2004 -05, but also because the assessee therein had not recorded the work-inprogress in the books of a .....

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gments 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 .....

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ssee and other companies and the assessee and other companies came forward 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 fo .....

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pinion 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 that even the minority decision of Ld. Technical Member of CESTAT was a legal order. This plea of the Ld. Special AR was rejected by the Tribunal in view of the decision of Third Member of the CESTAT. 60. Another objection raised by the .....

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AR for the Revenue also referred to the order of the Settlement Commission, Mumbai passed in the case of the assessee and other companies. It is true that the assessee approached the Settlement 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 whi .....

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rit 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. 61. The Tribunal thereafter, noted another aspect of the issue that no independent investigation was made by the Revenue, but the entire assessment was framed on the basis of information received from the Central Excise Dep .....

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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 par .....

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xcise Department as well as the adjudication order passed by the Ld. Commissioner of Central Excise, Aurangabad. Moreover, as observed above the adjudication Order passed by the CCE, Aurangabad has been cancelled by the CESTAT, Mumbai by majority opinion and hence, foundation of assessments for A. Yrs. 2007-08 & 2008-09 do not exist. The law is also well settled that when the assessee files an appeal challenging an order of the lower authority before the higher appellate authority then the e .....

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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 L d. 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 appel .....

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r section 132(1) of the Act on 17.03.2006 against M/s. SRJ Peety Steels Pvt. Ltd. and the assessment framed under section 153A r.w.s. 143(3) of the Act. The assessee therein i.e. M/s. SRJ Peety Steels Pvt. Ltd. had filed an appeal before 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 15 .....

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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 out u/s. 132(1) of the Income-tax Act on 17-03-2006 and accordingly the as .....

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and resultant concealed income in the case of the assessee. The Assessing Officer took 1,600 Units as consumption per MT which was a lowest as shown by the assessee. The Assessing Officer, accordingly, worked out the alleged suppressed production and made the addition in all the years while completing the assessments. In sum and substance the Assessing Officer had simply taken the lowest electricity consumption for a month in a whole year and accordingly worked out the total production as per h .....

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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 R .....

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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. If the Department had any doubts regarding the same, it could have been raised during the regular assessments and not in the asses .....

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urse disclosing the particulars of subject-matters were already on record. The returns have already been accepted and no assessment as such could be said to be pending on the date of initiation of search and abated in light of the provisions of s. 153A. 34. Without prejudice to above, with regard to invoking the provisions of s. 145 of the Act, according to which in case the AO is not satisfied about the correctness or completeness of accounts of the assessee or where no method of accounting pro .....

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rrect 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 .....

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s 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 consumptio .....

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to 2005-06. Therefore, rejection of books for these years purely on the ground that there has been divergence in the consumption of electricity and application of s. 144 is not at all justified. Accordingly additions have rightly been deleted in asst. yrs. 2000-01 to 2005-06 in both the cases. 23. It is clear from the order of the Tribunal in assessee s own case in the search and seizure matter as it is held that the consumption of electricity for the manufacturing of mild steel ingots/billets .....

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es 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 .....

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uted by the Revenue. The Tax Audit Report also contains the unit production of each year, which was accepted year after year along with returns and no query was raised by the Revenue. The finding of fact dated 31/03/2008 in the order passed by the Income Tax Appellate Tribunal refers to a detailed chart. The 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 assessmen .....

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ld 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 .....

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estigation has been done by the Revenue which are immediate next assessment years after the search and seizure operation against the assessee company and hence, in our opinion above findings and observation of the Tribunal as well as the Hon'ble High Court are also important to decide the present appeals more particularly on the additions based on consumption of electricity. 65. The Tribunal vide para 24 took note of the fact that in assessment years 2007-08 and 2008-09, no investigation was .....

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duction / 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 Cust .....

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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 e .....

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ion of purchase of input or clandestine removal of goods in fool proof manner known to law for which, it can be painfully said that the adjudication has no legs to stand. Both the appeals are therefore, allowed with consequential relief, if any." 11. The Customs, Excise & Service Tax Appellate Tribunal categorically held that the electricity consumption could not be criteria to determine the output laid down in R.A. Castings, where the appeal of the Revenue was dismissed by the Hon' .....

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ax Appellate Tribunal (supra) in the appeal filed by the assessee and its Director has categorically held that no cogent evidence has 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 bei .....

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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 electricity consumption to produce 1 MT of Ingots. The confessional statement was also given by the Managing Director of the said company before the Central Excise Authorities .....

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y 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 fi .....

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the basis of the adjudication order passed by the CCE, Aurangabad as well as the consumption of the electricity used in the manufacturing of the Ingots/Billets relying on the technical opinion of Dr. Batra, IIT, Kanpur. No other reasons are given by the Assessing Officer. We have already held that the Assessing Offic er was not justified in making the additions towards alleged suppression of production/sales. We, therefore, hold that the rejection of the books of account on above reason cannot b .....

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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 ar .....

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ccordingly, allow the Ground No. 10 taken by the assessee. 67. The Tribunal also dismissed 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 .....

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nt 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 various submissions and has relied on different case laws. The contention of the Ld. Special AR is sheer waste of process of law, wherein the submissions made before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) have been .....

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. Ltd. was made on the basis of the report of one Dr. Batra with regard to electric consumption and the Third Member of CESTAT had deleted the afo resaid addition made under the Excise law. However, in the case of assessee before us, there is no order of CCE, Aurangabad or of CESTAT and the Assessing Officer worked out the addition on the basis of erratic consumption of electricity vis-à-vis the consumption as per US standards after giving benefit of 25%. Following the same line of reason .....

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case. 70. Another objection raised by the Ld. Special AR before us during the course of hearing of the bunch of appeals was that it had moved Miscellaneous Application against the order of Tribunal dated 16.01.2015 and the hearing of the present appeals be kept in abeyance. After hearing the appeals in the present bunch of appeals, the Miscellaneous Application filed by the Revenue in M/s. SRJ Peety Steels Pvt. Ltd. (supra) was also fixed for hearing and the same was heard on 19.06.2015. We have .....

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ety 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 pr .....

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er is on pure estimates, conjuncture and surmises and the same cannot be accepted. We hereby delete the same. 72. Another aspect of the issue in relation to the addition on account of suppressed production, raised before us is that where the Assessing Officer had evidence of clandestine removal of material without payment of Excise duty, the addition could be upheld in the hands of the assessee by extrapolating the sales for period of 300 days. The Ld. Special AR for the said proposition relied .....

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olated. The basis for declaration of clandestine removal of material without payment of Excise duty was on account of search and seizure proceedings conducted by DGCEI on certain brokers and sub-brokers. Consequent thereto, Shri SRJ Peety, person in-charge of Shree Om Rolling Mills Pvt. Ltd. admitted to the said clandestine removal of material without payment of Excise duty and approached the Settlement Commission for payment of Excise duty on the said amount. The Settlement Commission accepted .....

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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 TMT Bars. The basis for such assumption was the electricity consumption, for which the Assessing Officer 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 th .....

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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 extrapolation of sales for 300 days, in view of the a .....

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sion, which has been accepted by the Settlement Commission in toto. The Ld. Special AR objected to the plea of assessee that declaration was to buy peace of mind, but we find no merit in the same, since the object of moving petition before the Settlement Commission is to settle the dispute. In cases where any settlement petition is moved by the claimants, the authorities have the power to re-visit the offer made by the claimant and where any adverse material is available against the person makin .....

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ar under consideration. In cases where the petition is accepted in the hands of the assessee by the Settlement Commission, then no further addition can be made in the hands of the assessee on account 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. 74. Another aspect of the issue is that though the factum of the assessee filing the petition before .....

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, 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 dur .....

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e of any evidence collected against the assessee, merely because the addition was made in the hands of the assessee in a preceding year, we find no merit in the submissions of the assessee that following the same ratio, extrapolation of sales for the assessment year 2007-08 should be made in the hands of the assessee, in view of the settlement petition by the assessee before the Settlement Commission. The perusal of the assessment order and the order of CIT(A) reflects no such basis was adopted .....

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assessee and made the aforesaid addition, which we in the paras hereinabove had already deleted. The Ld. Special AR pointed out that the said action of the Assessing Officer was one of the methodologies for working out the additional income of the assessee. We find no merit in the stand of the Ld. Special AR since no investigation or inquiry was carried out by the Assessing Officer and merely on the basis of petition filed before the Settlement Commission, which in turn has been accepted, no fur .....

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d 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. 77. Following the same analogy of reasoning, where the evidence of clandestine removal of material w .....

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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 ad .....

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of findings of the Assessing Officer and CIT(A) and the Tribunal cannot traverse beyond the orders of Assessing Officer and CIT(A). Admittedly, the parties can raise an additional plea before the Tribunal justifying the addition. However, the said plea has to be decided keeping in mind the facts of the case. Though both the Assessing Officer and CIT(A) had not made the addition in the hands of the assessee on the basis of petition filed before the Settlement Commission, but had adopted the errat .....

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he confessional statement before the Excise Department was an important piece of evidence. We are in agreement with the said proposition laid down by the Hon ble Supreme Court in Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala and another (supra), but the statement made before any of the authorities is limited to the amounts surrendered vide the said settlement and no inference could be drawn against the assessee for extrapolating the same for full year and for the balance year and in oth .....

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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 t .....

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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 further addition could be made in the hands of the assessee for the balance period. The Tribunal further held that hypothetical calculation of turnover and estimation of gross profit merely on guess work and presumption was not sustainable in law. No details were available to the Assessing Officer to arrive at such .....

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ere not sustainable. The Tribunal distinguished the ratio laid down in CST Vs. H.M. Esufali H.M. Abdulali (supra). The Ld. Special AR relied on the said decision and in view of the decision of coordinate Bench on similar issue as before us, we find no merit in the reliance placed upon by the Ld. Special AR. 85. The Ld. Special AR during the course of arguments before the Tribunal in Miscellaneous Application filed in M/s. SRJ Peety Steels Pvt. Ltd. vide MA No.17/PN/2015 had raised the issue of e .....

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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 a .....

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e 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 hav .....

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nder Chapter XIV-B and held that what is to be assessed under the said Chapter is undisclosed income of the block period and not the total income or loss of the previous year required to be assessed under regular assessment under section 143(3) of the Act. The Hon ble Bombay High Court held that such regular assessment stands on a different footing in contrast to the exercise undertaken by the Assessing Officer under Chapter XIV-B, where the Assessing Officer had to assess only the undisclosed i .....

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ent year 2006-07 is misplaced as the addition in the hands of the assessee in that year was made on account of search and seizure operations carried out by the Income-tax Department, wherein sales outside books were found for few days. However, no independent investigation / inquiry by the Income-tax Department has been made before completing assessment proceedings against the assessee. Another aspect of the issue is that the petition before the Settlement Commission has been made by the assesse .....

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sidered 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 accep .....

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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 Ld. Special AR relied on series of other decisions, but the ratios laid down by the said judgments are distinguishable and not applicable to the fac .....

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y the assessee by way of filing petition before the Settlement Commission, which in turn, has also been accepted by the Settlement Commission. Merely because the Settlement Commission accepted the claim of the assessee of additional Excise duty payable on the said clandestine removal of material without payment of Excise duty does not establish the case of the Revenue that the said figures of additional production should be utilized for extrapolating the sales in the hands of the assessee for th .....

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espective 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 an .....

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ission 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 bee .....

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t the additional income to be added in the hands of the assessee is equivalent to profits on suppressed production @ 4% or actual GP rate declared by the assessee whichever was higher. In view thereof, we pass this corrigendum order and the para 88 i.e. from line 17 to 22 would now be substituted by following para. 88. …… 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 .....

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landestine 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. Accordingly, 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 .....

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e assessee had moved a petition before the Settlement Commission, which was also disposed off and penalty of ₹ 25,000/- was levied. The facts and issues arising in the present appeal are identical to the facts and issue in Shree Om Rolling Mills Pvt. Ltd. Vs. Addl. CIT (supra) and following the same parity of reasoning, 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 dec .....

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ear 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 .....

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ce, no addition should be made on this account. The CIT(A) noted that the contention of assessee that after receipt of proceeds of sale, the suppliers of raw material were paid were not supported by evidence. Further, it was held that for producing the goods, other manufacturing expenses in addition to raw material were also required to be incurred. In view thereof, the said undisclosed investment in respect of undisclosed turnover was estimated at average undisclosed turnover of half week of ea .....

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on, 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 merit in the order of CIT(A) in working out the addition to the .....

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landestine 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 IT .....

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