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2018 (8) TMI 670

er has doubted the deduction claimed on the ground that the assessee is a sister concern of Tata Steel Limited and according to him, the agreement entered into with the assessee company was a ploy to reduce the income of the assessee. - It is trite law that suspicion howsoever grave cannot takes place of proof. The Hon’ble Supreme Court in [1954 (10) TMI 12 - SUPREME COURT] has held that “As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income Tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gur .....

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arrangement was made with the assessee company to reduce its taxable income. The reasons given by the Assessing Officer are as under: 4.6 The details furnished and the submission made by the assessee has been duly considered, in this regard the following need mention that i) The assessee did not establish any exact manufacturing loss in the process of making the finished goods, ii) The assessee was unable to explain how in the chromium level as stipulated by TSL occurred. iii) In fact, this occurrence was beyond the control probably due to the technological limitations, iv) Further, the level of chromium in the finished by the assessee was consistently maintained at this level, v) Despite this fact, TSL had been offering contracts assessee on a continuous basis, vi) It was also not explained how the slight difference in the chromium content would affect the quality of the end products produced by TSL on the basis of the finished goods supplied by the assessee. vii) The significance of the slight variation in the chromium content was not explained. viii) From the replies- furnished by the assessee it is to be inferred that the levels maintained by the assessee is normal based on the .....

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mts 1.79% 3-5% 2012-13 56261 mts 892.85 mts 1.59% 3-5% 6. The Assessing Officer has not considered the fact that the assessee is doing conversion job and the finish product has certain qualitative requirements which has been spelled out in the agreement entered into between both the parties. Similar agreements have also been entered into by M/s. Tata Steel Limited with other parties in the State on the same and similar terms and conditions as with the assessee. The assessee enclosed agreement entered into between Tata Steel Limited and Nava Bharat Ventures Limited, which was not a group company. The assessee also attached a detailed calculation wherein the recovery of Chrome Ore percentage wise and the recovery by Tata Steel Limited is laid out. Similarly, for the same financial year, the recovery of Chrome Ore percentage wise and recovery by Tata Steel Limited for M/s. Nava Bharat Ventures Limited is attached. It was pointed out that it can be seen from the two that this recovery is not happening from just the assessee but from every entity in the similar trade. The Assessing Officer has stated that it is ploy to reduce the profit margin of the assessee and, hence, the tax liabili .....

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and the transactions were not real. Moreover, in the course of appeal hearing, the assessee has filed copies of arrangements of Tata Steel Limited with others who are engaged in supplying the same product i.e. high carbon ferro chrome to Tata Steel Limited, wherein, the same provision for recovery/deduction on bills due to low chrome recovery is there. For instance, Tata Steel Limited has an agreement with Nava Bharat Ventures Ltd. which is not a Tata Group company and in the agreement same terms & conditions are there which exist in the agreement with the assessee company. Hence, it cannot be said that Tata Steel Limited and the assessee company has entered into an agreement deliberately so that the tax liability of the assessee company could be reduced because of deduction on account low chrome recovery. Moreover, the deduction made by Tata Steel Limited is real and the assessee company cannot be taxed on income not accrued or received. The Assessing Officer is justified to have a genuine doubt about the genuineness of the transactions of the assessee company with its sister concern Tata Steel Limited. However, on the basis of suspicion alone, no addition or disallowance can .....

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or inflated by the assessee in order to reduce its taxable income. It is trite law that suspicion howsoever grave cannot takes place of proof. The Hon ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd vs CIT, reported in 26 ITR 775/783 (SC) has held that As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income Tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT Further, the Hon ble Supreme Court in the case of Uma Charan Shaw Brors vs CIT, West Bengal reported in (1959 .....

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