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2017 (1) TMI 456 - ITAT AHMEDABAD

2017 (1) TMI 456 - ITAT AHMEDABAD - TMI - Reopening of assessment - addition made by allowing CENVAT Credit - Held that:- We find ourselves in complete agreement with the conclusion arrived at by the CIT(A) on merits. The CIT(A) has observed as noted supra that there is nothing on record to show that Central Excise Department has finally charged the assessee of misutilisation of CENVAT credit as alleged in the SCN. We find that the AO has not supported the allegation made in the SCN by any indep .....

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Thus, in the totality of the facts and circumstances of the case, the action of the AO in making additions towards misutilisation of CENVAT credit is devoid of merit. The CIT(A) in our view has rightly reversed the action of AO. Accordingly, we are not inclined to interfere with the order of the CIT(A). - Decided against revenue. - I.T.A. No.1449/Ahd/2012 - Dated:- 5-1-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER For The Appellant : Shri James Kurian, .....

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ssee filed return of income for the Ay 2005- 06 declaring a total income of ₹ 13,61,993/- on 20/10/2005. The case was selected under scrutiny and the assessment was completed under section 143(3)of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 22/02/2007 accepting the returned income of the assessee. Thereafter, notice under section 148 of the Act was issued on 30/11/2010 and the assessment of the assessee was reopened. The reasons recorded for .....

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able to tax amounting to ₹ 1,85,49,005/- has escaped assessment within the meaning of section 147 of the Act. He accordingly, usurped jurisdiction under section 147 of the Act. The reassessment order was framed under section 143(3) r.w.s.147 of the Act dated 23/12/2011 wherein impugned CENVAT credit was disallowed and total income returned by the assessee was inflated to this extent. 3. The relevant para dealing with the issue in the reassessment order, reads as under:- [5] CENVAT Credit o .....

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The assessee was also show caused as to why the same should not be added to the total income of the assessee. In reply, the AR of the assessee has submitted vide letter dtd. 01.11.2011 as under: "In respect to your point no. 6 of the letter dt. 18/07/2011 we state that the Excise Dept. has undertaken the search in our premises on 16/12/2006. In the said search they have not found anything incriminatory or any evidences which will show that we have sold the goods in and around Delhi. They h .....

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ce 2007 we are asking the various details & cross examinations from the Excise Deptt. On the basis of which they have issued show cause notice. We regret to state that the Excise Dept. has not given till today Full details. We hereby like to point out your attention to the fact that Excise Dept. has not objected to our High Seas Purchases. The purchases are genuine even as per Excise Dept. We further state that the CVD on High Seas purchases are paid directly by us by pay orders to Central G .....

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en as Cenvat Credit & credited directly to Excise collection A/c. It is not debited as expenses to Profit & Loss A/c nor debited to purchases A/c. In short it is not charged to P & L A/c. Therefore there is no question of any bogus expenses or any income escaping assessment as claimed in your letter dt. 16/08/2011. Thus we state that the alleged High Seas purchases are in fact came as raw material to our factory/ to our labour job processor who were doing extrusion processes for us. .....

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se Dept. has not objected also. Then these, goods can't come from Air. These finished goods required raw materials. The Excise Dept. has not found for any contra source for raw materials of these manufactured goods........." [5.1] I have carefully and thoroughly gone through the above contentions of the assessee and they are not acceptable in view of the glaring evidences on record and facts available in this regard which are as discussed. [5.2] As regards the Cenvat Credit to the tune .....

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ries were explained in the SCN. It is further stated in SCN that Shri Mevala Rampadharath Rajmar owner of vehicle No.GJ-l-K-3800 categorically admitted that his vehicle No.GJ-l-K-3800 has never lifted/delivered goods from Delhi as the said vehicle is not having permit to enter Delhi, which proves that the said LR NO.DLI-101-6541 issued by M/s Time & Space Haulers is a fake LR and no goods have been transported from Delhi as mentioned therein. [5.3] In view of the facts and circumstances narr .....

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8377;1,85,49,005/-which is in fact, bogus expenses claimed for the year under consideration. This is a new evidences/information gathered in the case of the assessee. Such information was not provided by the assessee during the course of original assessment proceedings. This act of the assessee, in not disclosing true and correct affairs of its business, is deliberate and with a view to avoid the payment of legitimate tax dues. Therefore, bad claim of CENVAT Credit to the tune of ₹1,85,49, .....

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er of the CIT(A) dealing with the merits of the case reads as under:- 5.6 DECISION : I have considered carefully the observations of the AO in the assessment order as well as the contention raised by the AR of the appellant. The AO made addition on the basis of the SHOW-CAUSE NOTICE issued by the Central Excise Department. The facts of the case is that the Central Excise Deptt. had found that the appellant had apparently misused CENVAT credits although the imported raw materials have not been us .....

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ithdrawn by the Central Excise Department become the income component in this case. More so, when the AO has not disturb the both sales and purchases reflected in the P&L a/c. of the appellant. Once more important aspect i.e. the CENVAT Credit has not been reflected in the P&L A/c but the AO disallowed it without rejecting books of a/c. of the appellant. In this factual matrix, the ld.AR made further clarity into the whole transactions by his submissions mentioned above. In this backgrou .....

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Credit of ₹ 10/-. When the goods are manufactured and sold this ₹ 10/- is adjusted against the payment of Duty. In the instant case, the appellant follows the Exclusive method of accounting i.e. a separate a/c. is maintained for excise duty. Hence, the CENVAT Credit has not been routed through P&L a/c. which is allowed by the principles of AS. Then, how can the AO disallow an item which was not claimed by the appellant. The next question is to be answered is whether disallowance .....

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-vis the CENVAT Credit. There is also nothing on record to show that the Central Excise Department has finally charged the appellant of misutilisation of CENVAT Credit as alleged in the SHOW-CAUSE NOTICE. The additions on the basis of SHOW-CAUSE NOTICE and without proper application of concept of Income with regards to the CENVAT Credit disallowance automatically cannot form part of income of the appellant. On the other hand if the CENVAT Credit disallowance is considered from the Income Tax ang .....

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allowed. 5. Aggrieved, the Revenue is in appeal before the Tribunal. 6. The Ld.DR for the Revenue relied upon the re-assessment order of the AO and submitted that the assessee has misutilised the CENVAT credit which has been rightly brought to tax by the AO. The Ld.DR submitted that the action of the CIT(A) in bringing down the additions made is thus uncalled for and requires to be reversed. 7. The Ld.AR, on the other hand, reiterated its submissions made before the lower authorities and conten .....

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ospel truth. No enquiry whatsoever was made to corroborate the allegation made by the Central Excise Authorities. The Ld.AR, secondly, objected to the addition on the premise that the alleged misutilisation of CENVAT credit has not been routed through the Profit & Loss Account and therefore has no effect on the ultimate profits of the assessee. The Ld.AR next contended that the CIT(A) has rightly appreciated the facts in perspective. The Counter Veiling Custom Duty (CVD) actually paid on the .....

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