TMI Blog2017 (10) TMI 1501X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee. - D.B. Income Tax Appeal No. 273 / 2017, D.B. Income Tax Appeal No. 110 / 2015, D.B. Income Tax Appeal No. 193 / 2015, D.B. Income Tax Appeal No. 12 / 2017 - - - Dated:- 12-10-2017 - K. S. Jhaveri And Vijay Kumar Vyas, JJ. For the Appellant : Mr. K.D. Mathur for Mr. R.B. Mathur For the Respondent : Mr. N.L. Agarwal Mr. Siddharth Ranka JUDGMENT 1. Since all these appeals arise out of same judgment and order, they are being decided by this common order. 2. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeals of the revenue. 3. Income Tax Appeal No.273/2017 is admitted for hearing on the following substantial questions of law:- 1. Whether in the facts and circumstances of the case, the ITAT was justified in law and has not acted perversely in confirming the order of CIT(A) deleting additions of ₹ 11049086/- which was made on account of suppression of scrap sales. 2. Whether in the facts and circumstances of the case, the Tribunal was justified in law in deleting the addition of ₹ 11049086/- on account of concealed sale of scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that the AO while considering the matter has taken into consideration the scrap on which the excise duty was paid, was not reflected in the return. Therefore, while considering the matter the AO has assessed the income, observing as under:- A. Scrap Sale In response to above said show cause notice, the assessee vide their letter dated 22.12.11 submitted that the ER-1 is return of the excise filed by the assessee for the excise duty liability ascertained by him for a particular period. The figures shown in ER-1 is not sales but the value of the transaction liable for excise duty. In business of the manufacturing of bearings there are certain percentage of wastage which is calculated on engineering standards and parameters and excise duty also chargeable on such scrap. Whether any amount is realized or not realized for scrap or wastage material. In our case we sublet some of our manufacturing process to sub-vendors and in that cases the wastage material/scrap is not returnable by them but as per norms and provisions of the Central Excise Act we have to calculate the excise duty on such kind of the wastage/scrap on the basis of standard parameters and also to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o passed on the job work inturn to the other vendors and out of total contract receipts of ₹ 3.88 crores, it had subcontracted the contract work of ₹ 3.10 crores to other job workers. Inspite of this fact, M/s Noble Industries had shown the sales of the scrap of ₹ 7,47,109/- in its books of account. In support of the same, copies of invoices for sale of scrap to M/s Santosh Steel Corporation and Shree Shyam Steel Corporation by M/s Noble Industries were also filed. The matter was remanded to the AO for examination of M/s Noble Industries along with its books of account vide my letter dated 28.03.2012. During the remand proceedings, books of account of M/s Noble Industries were produced before the AO and it was also confirmed that it had not returned any scrap to the assessee. Further part of job work was sub-contracted and it had not received any scrap from the sub-vendors. The AO has made sweeping allegations against the assessee that since the vendor namely M/s Noble Industries was an associate concern therefore by letting it retain the scrap, the profits of the assessee firm had been transferred to the said concern. However there is no material brought on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 read with supplementary instruction, the appellant paid excise duty on the notional value of scrap. However in the present case, it is not material whether the appellant had paid any excise duty or not on the scrap retained by the vendors since it is not the subject matter here. The moot point is whether any scrap/wastage was sold by the appellant or it was not recorded in the books of account. There is no evidence that the appellant had received wastage/scrap from its vendors. There is no evidence that the appellant had sold the scrap outside the books of account. The AO has proceeded on the presumption that as the appellant had paid the excise duty on the sale of scrap/wastage, such income had accrued or received by it. In reality, the excise duty was paid on notional value and no income had accrued to or received by the appellant. Further, on the basis of legal principle that no notional income, which should have been earned and is not earned, can be brought to tax. In the case of CIT Vs Shoorji Vallabhdas and Co. (46 ITR 144), the Hon ble Supreme Court held that no doubt income-tax was a levy on income and the Income-tax Act took into accounts two points of time at which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly no adverse inference could have drawn against the appellant merely on surmises. There was no real income which could be brought to tax in the hands of the appellant on accrual basis or receipt basis. In view of above facts, I direct the AO to delete the addition of ₹ 1,35,56,787/- made by him. This ground of appeal is allowed. 4. In the second ground of appeal, the appellant has challenged the addition of ₹ 2,33,96,017/- on account of concealed sales which also included the amount of ₹ 1,35,56,787/- added on account of concealed sale of scrap. Before me, the counsel of the appellant has argued that during the course of assessment proceedings, the assessee had filed reconciliation statement wherein as per excise return following sales return/rate difference/short/receipts and other debit notes were adjusted. The assessee filed complete documentary evidences in this regard but the AO had out rightly rejected the claim of the assessee without mentioning anything in this regard. The AO had simply mentioned that the amount of rate difference could not be deduced from the sales declared in ER-1 return because the sales declared in include the increased va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Department. The appellant had further claimed an amount of ₹ 98,39,230/- on account of raw material rate difference between HSS material and raw material as per contract. The AO has not allowed the rate difference simply on the ground that the amount was raised through supplementary invoices. However on perusal of the various document filed by the appellant, the rate difference of ₹ 98,39,230/- is found to be in order. The appellant had raised the invoice No. 1528 dated 20.09.2008 for an amount of ₹ 25,93,355/- to M/s SKF India Ltd however M/s SKF India Ltd paid an amount of ₹ 12,34,549/- against this invoice and therefore there were short receipts to the extent of ₹ 13,58,806/-. The appellant had raised the invoice No. 1539 dated 22.09.2008 for an amount of ₹ 33,96,275/- to M/s SKF India Ltd however M/s SKF India Ltd paid an amount of ₹ 22,27,394/- against the invoice and therefore there were short receipts to the extent of ₹ 11,68,881/-. The appellant had raised the invoice No. 1540 dated 22.09.2008 for an amount of ₹ 56,07,531/- to M/s SKF India Ltd however M/s SKF India Ltd paid an amount of ₹ 31,45,428/- against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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