TMI Blog2016 (2) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... ent have been more or less settled in favour of assessee and no adverse view can be taken on the basis of the show cause notices. It has no bearing on the sales figures of assessee, as there is no case of Central Excise for any suppressed production. Even though, Ld. DR relied on the Central Excise case press note before us, it is a case by the Central Excise Department for suppressed production on a meticulous enquiry by the officer which was upheld by the Tribunal. In this case, in spite of conducting search and seizure operations, no incriminating material was found. There is no scope for any addition being made in the present case. As rightly contended by the Ld. Counsel, Books of Accounts were not rejected. The addition made by the AO is purely on the basis of estimation of power consumption and supposedly suppressed production cannot be sustained in the absence of any evidence on record. Keeping these aspects in mind, we uphold the order of the Ld. CIT(A) and reject the Revenue s grounds. - ITA No. 225 to 230/Hyd/2012, ITA No. 862 to 868 /Hyd/2012, 27/Hyd/2013, 1367/Hyd/2014, 1555/Hyd/2011 - - - Dated:- 19-2-2016 - Shri B. Ramakotaiah, Accountant Member And Shri S. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 2008-09 are completed u/s. 143(3). M/s. Balaji Steel Rolling Mills Pvt. Ltd., 2.1. For the sake of convenience and clarity, the facts in ITA No. 225/Hyd/2012 for the AY. 2002-03 in the case of M/s. Balaji Steel Rolling Mills Pvt. Ltd., is considered in detail. ITA No. 225/Hyd/2012 (AY. 2002-03) 3. In this assessment year, assessee had originally filed return of income and consequent to the notice u/s. 153A, filed return admitting the same loss of ₹ 1,01,187/- as originally returned. Even though there were search and seizure operations, as seen from the assessment orders passed there seems to be no incriminating material in the search identified and seized. Even though certain documents pertaining to quantity s details, details of sales and certain transactions with the parties at Jabalpur, Nagpur and Hyderabad etc., were seized and listed as a specific reference in para 3 of the order under the head seized material as seen from the order(s), there is no correlation with those seized documents with reference to any of the specific issues considered by the AO. When enquired in the course of arguments, Ld. Counsel admitted that those details are not incriminatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts without payment of duty, clearance of scrap without payment of Duty and show cause dt. 28-01-1998 for non-payment of duty but settled under the Kar Vivad Samadhan Scheme . He also considered the amounts of advances shown in the books to the extent of ₹ 1,49,60,000/- during the year shown as income in the P L A/c. 4. When the issue was carried to the CIT(A), assessee filed various grounds and also additional grounds which was referred to the AO on remand. Ld. CIT(A) after considering the detailed submissions of assessee as extracted in para 4.3, deleted the additions so made by AO, stating as under: 4.5 I have considered the submissions made by the appellant, gone through the order of the Assessing Officer. It may be noted here that it is a settled matter now that any addition based on the results of a search must be based on the material found during the course of search on which there was no explanation of the appellant or the explanation offered by the appellant was not found acceptable. In other words, there is no place for any addition in an assessment in consequence of a search based on surmises, guess work and imagination. Precisely, the AO in the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to delete the said addition made for all the assessment years under challenge . 5. Ld. DR while supporting the orders of the AO submitted that there is no explanation from assessee about excess consumption of electricity and also referred to press report came in Business Standard about the judgment of the CEGAT, dt. 09-05-2011 to submit that Revenue finds it difficult to establish that certain goods were manufactured and removed clandestinely. While referring to certain paras in the report, it was submitted that while in most of the cases, marshalling of evidence acquired from the investigation does not prove enough for the Tribunal or the course to uphold the allegation of clandestine removal, in few cases the allegations have survived due to systematic investigation by some very hard working officers of the department . Then, he referred to the findings in the said case to submit that for production of one Metric Ton of mild steel ingots, the average power consumption would be in the range of 555 KWH 1026 KWH as per the scientific studies conducted by IIT, Kanpur. It was submitted that in this case also, the AO has examined the issue meticulously and arrived a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though it refers to certain documents which are impounded / seized, no adverse view was taken about the contents therein. The order does not speak of any incriminating nature of the said documents. The only issue which AO has adjudicated is the high consumption of electricity in assessee s case. As per the average norm of an ideal business situation, the power consumption would be around 800 1000 KWH, on which there are various studies. But is it possible to determine the unaccounted production on the basis of the ideal consumption of power in an ideal unit. Generally in the market, various cars are sold with the projection of 20 to 23 KMs per liter of mileage but on road conditions, it is everybody s experience that car does not given more than 10 to 12 KMs mileage per liter. There is a lot of variation between ideal test conditions and actual business conditions. It was assessee s explanation that high power consumption was a result of : i. Because of the nature of the unit; ii. Un-skilled workers; iii. Un-scheduled power-cuts; iv. Production schedules In view of this, it was submitted that consumption of power is high. AO has taken sufficient pains in refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal is dismissed. ITA Nos. 226 to 230/Hyd/2012 8. The facts being same except amounts involved in the above appeals, we uphold the orders of the CIT(A) and reject the Revenue s contentions. 9. In the results, appeals in ITA Nos. 225 to 230/Hyd/2012 are dismissed. M/s. Balaji Steel Rolling Industries: 10. As seen from various appeals Revenue has completed assessments of this firm using the company PAN number. Only in AY.2008-09 the correct PAN number is used. In these appeals also, similar to the one which AO passed in the appeals of M/s. Balaji Steel Rolling Mills Pvt. Ltd. above, the AO estimated the suppressed production on similar lines. Ld. CIT(A) after considering assessee s submissions, deleted the addition more or less on the similar reasons as stated above. For the sake of record, in AY. 2001-02, AO made an addition of ₹ 30,91,330/- by arriving at the suppressed income while determining the power consumption for production of one ton of flats and rods in assessee s business at 200 KWH, after recording that the sister concern in AY. 2000-01 consumed only 132 KWH per ton. He also allowed burning loss of 12% for the purpose of determining requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and removed them other than what has been declared. Proper excise registers have been maintained. The information obtained from the Technical Officer cannot be relied on for the simple reason that the Chairman-cum-Managing Director of the said company has specifically stated in his communication to the department as under:- Please note that information furnished by our Officer is based on his individual knowledge / views expressed and it cannot be taken is an authority for any purpose as it may differ from the point of view of other technical officer In other words, the Managing Director of the Sponge Iron India Ltd., is not sure about the actual consumption of Unit for manufacturing of foods as the appellant already stated herein above consumption of electricity depends upon the various factors since the appellant's unit is a labour oriented, negligence and laziness of the labourers, slow work tactics, temperature in summer which makes human being partly lazy, unworkable and supply of power with frequent interruption. All these cause consumption of electricity. Therefore, the figure for arriving the production on the basis of electricity consumption is not corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seizure assessments. Thus, I do not have any hesitation in directing the AO to delete the additions made for all the assessment years under challenge . 11. After considering the rival contentions and perusing the orders of the authorities, we do not see any reason to interfere with the order of the CIT(A). In all the impugned years, the addition being similar, the reasons given above in the case of M/s. Balaji Steel Rolling Mills Pvt. Ltd., will equally apply here. In view of the detailed reasons stated above, we do not see any reason to consider the Revenue s grounds. In the result, orders of the CIT(A) are upheld and all the appeals in ITA Nos. 862 to 868/Hyd/2012 are dismissed. ITA No. 1367/Hyd/2014 : 12. This order was passed by the CIT(A) on 19-05-2014, wherein Ld. CIT(A) deleted the addition of ₹ 35,97,380/- by giving the following reasons: 06.0 I have gone through the facts of the case and the submissions and also the appellate orders of CIT(Appeals), Guntur and CIT(Appeals)-I, Hyderabad. From the order of CIT(A), Guntur mentioned above it is seen that while deciding the issue, he had considered that the appellant is a small scale unit, existing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us recrors ike type and quality of scrap used, number of break downs, quality of labour/supervisory staff, diligence of management etc. Accordingly, in the said case, the Hon'ble ITAT held that the AO's action in estimating the production of the assessee company on the basis of alleged excessive consumption of electricity is erroneous and fallacious. It is seen that a similar view has been taken by the Hon'ble Ahmedabad Bench of the ITAT in the case of Eastern Enterprises Vs. ACIT (ITA NO.352/Ahd/2010 dated 15-6-2012) also, wherein they opined that the consumption of electricity may rise due to hundreds of factors and therefore, no addition is justified. 06.4 It is clear that in the present case, apart from estimating production on the basis of excessive consumption of electricity, determined on comparison with the consumption figures of a large public sector undertaking, the Assessing Officer has not been able to bring on record any other evidence to support his conclusion regarding unaccounted production. Following the decisions of the Hon'ble ITAT cited above and also the appellate orders passed by the CIT(A), Guntur and CIT(A)-I, Hyderabad on identical fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds. For the detailed reasons given above, we agree with the order of the CIT(A) that there is no basis for making any addition. Accordingly, the grounds are rejected. In the result, this appeal Revenue is dismissed. 15. One contention of the Ld. Counsel in all the Revenue appeals is that the additions cannot be made in the proceedings u/s. 153A when there is no incriminating material. He relied on the Special Bench decision of All Cargo Global Logistics Ltd., Vs. DCIT [137 ITD 287 (SB)] (supra) and also Co-ordinate Bench at Bombay in the case of ACIT Vs. Jayendra P. Jhaveri [65 SOT 118] (Mumbai) (URO) (supra). However, in view of the jurisdictional High Court judgment in the case of Gopal Lal Bhadruka Vs. DCIT [346 ITR 106] (AP) (supra), we are of the opinion that AO can take into consideration the material other than that available during the search and seizure operations, for making an assessment of the undisclosed income of assessee. On legal principles of abatement of assessments in some years, even though there is merit in assessee s contentions with reference to the proceedings u/s. 153A for some of the impugned assessment years, we find no reason to give any adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant contends that the said advances were forfeited since the buyers did not turn up to lift their material intended to be purchased. In my view, the explanation given by the appellant is inconceivable and unbelievable. No prudent person after paying huge advance to the tune of ₹ 20 to 55 lakhs would allow it to be forfeited. I therefore agree with the stand of the Assessing Officer that the advance forfeited was nothing but a camouflaged accounting entry to bring in the unaccounted trading receipts into the books for regularisation. The appellant in his submission before the AO had also explained the same to be sale receipts not materialized. Taking a cue from the advance forfeited the AO had proceeded to conclude that the trading receipt has resulted from sale of suppressed production brought into the books. Had the advance received by the appellant being genuine, the appellant would have produced the details of the payers for further verification. The appellant failed to do so. Therefore, I hold that there was no infirmity on the part of the AO in computing the suppressed production which is fortified from the accounting entries in the appellant's books as othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3). However, instead of examining the Books of Accounts of this year, as seen from the assessment order, AO listed out the so called seized material, show cause notices issued by the Central Excise authorities and the amounts offered as incomes upto AY. 2007-08 by way of forfeiture of advances in the order and on similar lines arrived at the suppressed income at ₹ 2,16,11,739/-. Ld. CIT(A) as seen from the above order, upheld the contentions of the AO for the reasons stated by him. However, he has directed the AO to give credit to the other income admitted by assessee in the Books of Accounts. 18. After considering the rival contentions, we do not see any reason to uphold the order of the CIT(A) and AO on the issue. As in all the years decided above, the addition is made on the basis of the presumptions and surmises, without there being any evidence leave alone any incriminating material. Order cannot be upheld which was based on presumptions and surmises. Assessee s objections with reference to Books of Accounts have not been rejected; there is no incriminating material; the report of Sponge Iron India Ltd., cannot be taken as basis has to be upheld as valid. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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