TMI Blog2015 (8) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... g such sales which goods have been clandestinely removed. In view of our deleting the addition in the hands of the assessee, the grounds of appeal raised by the Revenue, i.e. against application of GP rate and allowance of expenses are also dismissed. However, the AO is directed to include additional income in the hands of the assessee on account of clandestine removal of goods without payment of excise duty as admitted by the assessee before the DGCEI, Aurangabad. - Decided against revenue. - ITA Nos. 216 & 218, 219 to 221, 224 to 230, 243 & 244, 258 to 261, 279 to 281, 402 to 404, 408 to 410, 414 to 416, 418 to 420, 676 to 679, 636 & 637, 680 to 683/PN/2012 - - - Dated:- 5-8-2015 - MS. SUSHMA CHOWLA AND SHRI R.K. PANDA, JJ. Appellant by : Shri J.P. Bairagra Respondent by : Shri Sunil Ganoo (Special Counsel) ORDER R.K. PANDA, J. The above batch of cross appeals filed by the different Assessees and the Revenue are directed against the separate orders of the CIT(A), Aurangabad passed under section 143(3) r.w.s. 147 and/or under section 143(3) for the Assessment Years 2005-06 to 2008-09 respectively. For the sake of convenience all these appeals were h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,47,746/- which includes addition on account of disallowance of interest and donation at ₹ 3,09,417/- and ₹ 10,000/- respectively . 3. The AO received information from the office of the Commissioner of Central Excise and Customs, Aurangabad vide letter dated 29-03-2010 that the assessee had indulged in manufacture of finished goods and removal thereof without paying excise duty. The order of the Commissioner of Central Excise and Customs quantifying the assessable value of suppressed production for the A.Yrs. 2006-07 to 2008-09 was also received. In view of the said information, the AO recorded reasons for reopening of the assessment u/s.147 of the I.T. Act and notice u/s.148 was issued on 04-05-2010. In response to the same, the assessee submitted that the original return filed may be treated as return in response to notice u/s.148 of the I.T. Act. Subsequently, notice u/s.142(1) and 143(2) both dated 12-05-2010 were issued along with a questionnaire. 4. During the course of assessment proceedings the assessee, in response to statutory notices, produced the books of accounts, furnished the details called for and explained the return of income which were test che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such unaccounted production was treated by him as deemed income of the assessee u/s.69C of the I.T. Act. Since the assessee had admitted to have sold M.S. Ingots to the extent of 125 Metric tonne and 75 Metric tonne to Rutuja Steels Pvt. Ltd. and Vijaya Rolling Mills separately to the extent of ₹ 35,19,360/- @ 18,048/- per Metric tonne during the F.Y. 2005-06 and 2006-07 relevant to A.Yrs. 2006-07 and 2007-08 the AO made addition of ₹ 17,59,680/- during A.Y. 2006-07 and another ₹ 17,59,680/- during A.Y. 2007-08 u/s.69C of the I.T. Act. 6. The AO also made addition of ₹ 3,51,936/- u/s.40A(3) of the I.T. Act. However, according to the AO since both the amounts are subsumed in the addition on account of suppressed production no separate additions were made in the computation sheet. 7. The CIT(A) noted that various manufacturers of MS ingots/billets were in appeal and the contention of the said persons were that the undisclosed production calculated on the basis of electricity consumption was not justified, even though addition on account of clandestine removal of MS ingots/billets in the year under appeal was agreed to buy peace of mind and to avoid li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity includes usage of furnace load or auxiliary load; a 6 MT furnace will consume slightly more power than 25 MT furnace per metric ton of production; a continuous casting process uses more electricity, however, the A.O. has not given effect to the above observations in the assessment order. (10) The undisclosed production calculated on the basis of electricity consumption is not justified as per various decisions under Excise Act and also Income Tax Act relied on by the appellants. Some of the decisions heavily relied on are R.A. Castings Vs. Commissioner of Excise, Meerat-I 2009 (237) ELT 674; this decision is uphold by the Hon'ble Allahabad High Court; Nashik Strips Pvt.Ltd. Vs. Commissioner of Central Excise, Nashik 2010-TIOL-1110-CESTAT (Mum); Bhavshakti Steel Mines P.L. Vs. CCE, Nashik order Nos.356-3 57/11/EB/C-II, CESTAT, Mumbai dated 08/04/2011. (11) The cost of production claimed by the appellant is justified as similar cost of production has been shown by other more than 15 companies manufacturing the same products in Jalna Industrial Estate since 1985. (12) The addition on account of clandestine removal of MS ingots/billets in the years under app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made only on the basis of material found in search action. In view of the above facts, the reliance placed by the appellant on the above referred decision is misplaced. Further, the other decisions relied on by the appellant in support of its above contention are also distinguishable on facts as in the said cases the clandestine removal of goods was not proved and admitted as in the case of the appellant. Further, the reasons for estimating the production on the basis of electricity units consumed were not present in the said cases. (6) The contention of the appellant that the books of accounts 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) The appellant has not maintained information in form No.G-7, which is compulsory, showing daily consumption of power in units. (8) The facts of the decisions relied on by the appellant are different and ratio laid down by the said decisions in the case of ACIT Vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectfully considering observations in the decision of Customs, Excise Service Tax Appellate Tribunal, West Zonal Bench order 01/03/2011 in the case of the appellant and others, I hold that there is suppression of sale and profit in the years under appeal and hence the profit declared by the appellant cannot be accepted without making further addition on account of profit on suppressed sale. 7.4 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 MS ingots/billets on the basis of electricity unit consumption. The first issue is, therefore, decided against the appellant. 8. Aggrieved with such order of the CIT(A) the Assessee as well as the Revenue are in appeal before us by taking the following grounds : Grounds by Assessee : 1. The learned Commissioner of Income Tax (Appeals) erred in confirming the re-opening of the assessment u/s. 147 of the Income Tax Act. 2. The learned Commissioner of Income Tax (Appeals) further erred in not taking cognizance of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) further erred in confirming the addition on account of initial undisclosed investment for undisclosed turnover of ₹ 12,51,514/-. 11. The learned Commissioner of Income Tax (Appeals) further erred in not holding that the order passed by the Assessing Officer u/s. 143(3) r.w.s. 147 is void and not valid in law as the same has been passed without issue of notice u/s. 143(2) of the I. T. Act. 12. The learned Commissioner of Income Tax (Appeals) further erred in not following the order of the Hon. Income Tax Appellate Tribunal in the case of M/s. The SRJ Peety Steels Pvt. Ltd. for assessment years 2000-01 to 2006-07 reported in 137 TTJ (Pune) 627, wherein the similar addition was deleted. 13. The appellant company craves leave to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing. Grounds by Revenue : 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 payment of taxes. 2. On the facts and in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of filing MA against the earlier orders of the Tribunal, was rejected. The appeals were adjourned to 13.03.2015 and then 05.05.2015 at the request of the Special AR. On 05.05.2015, the Counsel for the assessee opened his arguments which were replied to by Special AR for the Revenue. On 05.05.2015 itself, the Special AR filed written submissions alongwith compilation of case laws and the matter was adjourned to 07.05.2015 for further hearing. On 07.05.2015, the case was taken up in the pre-lunch hour and was argued at length by the Special AR for the Revenue. The Counsel for the assessee strongly opposed the same on the ground that the Special AR for the Revenue had concluded his arguments on earlier date and today the matter was fixed for his rejoinder. The hearing could not be concluded in the prelunch hour session and it was directed that the hearing would continue at 03:00 PM i.e. after the lunch hour to which both the parties consented. On reassembling of the Bench, the Special AR for the Revenue furnished letter under his signature stating that the Pr.CIT, Aurangabad was contemplating to file certain petitions before the Hon ble President/Vice President, ITAT, Mumbai and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 22. Though the assessee has raised several grounds of appeal, but the issues raised by the assesse are four-fold on the following accounts:- a) Reopening of assessment under section 147 and non-supply of reasons for reopening the assessment under section 147 of the Act; b) Non-issue of notice under section 143(2) of the Act after reopening the assessment under section 147 of the Act; and c) Addition made on account of alleged suppression of sales on the basis of consumption of electricity as per US standards and evasion of Excise duty by the manufacturers of TMT bars in Jalna cluster found by Director General of Central Excise and Customs; and working out the addition by applying GP rate of 4% on the alleged suppression of sales, after rejecting the books of account under section 145 of the Act. d) Addition made on account of investment in purchases relating to suppression of sale. 23. The Revenue on the other hand, is in appeal against the order of CIT(A) on the following grounds:- a) In quantifying the suppressed production @ 4% as against the addition made by the Assessing Officer on account of the total suppressed production, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Tribunal and then meet with the respective objections of both the authorized representatives. 27. Though the case of the learned Authorized Representative for the assessee was that the issue raised in the present appeal was identical to the issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra). However, the Ld. Special AR stressed that the issue was at variance and made elaborate submissions. It may be put on record that M/s. SRJ Peety Steels Pvt. Ltd. (supra) is a case of furnace, which is engaged in the manufacture of 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 deleted the addition made in the hands of respective furnace cases. Also, in the case of the assessee before us, there is order of CCE, Aurangabad and there is order of Third Member of CESTAT. In some of the years, the owners of furnace on the basis of certain information gathered by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee and some reasonable percentage of the gross profit is to be estimated. Ld. CIT(A), accordingly, directed the Assessing Officer to adopt gross profit @ 4% on the value of alleged suppressed production/sales and accordingly, partly sustained the additions. Now, we first decide the core issue in this case (i) On the facts and circumstances of this case whether the Assessing Officer was justified in making the addition of ₹ 39,20,36,546/- in the A.Y. 2007-08 and ₹ 40,75,72,486/- in the A.Y. 2008-09 on alleged suppression of 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. 29. 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 of the order, the Tribunal observed as under:- 13. We have heard the rival submissions of the parties and perused the record. Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2006 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 on record that the assessment framed by the Assessing Officer in consequence of search and seizure action against the assessee u/s. 153A r.w.s. 143(3) have reached the Hon'ble jurisdictional High Court. We will later refer to the decision of the Tribunal as well as Hon'ble High Court and certain important observations made in respect of the assessment framed by the Assessing Officer. It is also to be taken note that the A.Ys. 2007-08 and 2008-09 before us are immediately next assessment 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 investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 275 MTs. The sale price was received in cash from Shri Om Rolling Mills Pvt. Ltd. and hence, there was no accounting. The assessee admitted the said charge of the Central Excise Authorities i.e. DGCEI and approached the Settlement Commission and paid the excise duty to the extent of ₹ 7,79,313/- for clearing the goods without payment of excise duty. The declaration 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 arriving at the conclusion that as compared to the consumption of the electricity shown by the assessee the production was much more lower, has given the examples or reference of some other manufacturers against whom action taken by the Central Excise authorities. As observed by the Assessing Officer as per an article written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. So far 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 excise duty adopting statistic of power consumption. In the computation for the A.Y. 2008-09 the Assessing Officer made the mistakes by mentioning Rs. (-) 1,91,62,000/- as per the order u/s. 143(3) when in fact the said figure is as per the return of income filed by the assessee for the A.Y. 2008-09. 30. After analyzing the submissions of the assessee, the Tribunal noted that in both the years before it, the Assessing Officer had determined the alleged suppression of production / sales as determined 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records with an intent to evade payment of Central Excise Duty and, have involved themselves in the clandestine removal of final products. He also referred to the show cause notice issued by the DGCEI to the assessee which matter was ultimately settled by the assessee company in the Settlement Commission. The Ld. Commissioner also referred to non-maintenance of the proper electricity consumption record more particularly in 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 opinion 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 different decisions of the Tribunal. The Ld. Commissioner also relied on the investigation made by the DGCEI and show cause notice issued to the assessee and how the assessee approached the Settlement Commission and admitted the evasion and paid the excise duty and obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lead to high power- consumption, and another Letter dated 5.4.2008 of Electrotherm agreeing-., with .the views of Induction Furnace Association and informing that it is very difficult to define any range of power consumption. 20.2 As against this, in para 20 of the Order, the Tribunal in R.A. Casting (supra) considered different electricity consumption figures for production of 1 MT of MS Ingots, reported in following different reports- (i). 555 to 1046 (KWH/T) as per Dr. Batra's report; (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, N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt by the consignees; (v). Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal, 20.5 However, since no such evidences were brought on record, the Appeal of R.A. Casting was allowed for want of evidence relating to the above points, with 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 area). 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 higher Auxiliary load, e). Past case settled before Settlement Commission, 20.7 So far as the proceedings already settled are concerned, the Commissioner is hot relying on the same and the findings of the Commissioner, as recorded earlier, have not been challenged by the Revenue. All these other allegations were also levelled in R.A. Casting (supra). It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals. 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 that the Department is not required to prove its case to its mathematical precision, by relying on judgment of the Hon'ble Supreme Court in the case of D. Bhoormull - 1983 (13) ELT 1546 (SC), relied upon by the Commissioner as well as the Hon'ble Member (Technical). It is seen that even this judgment was considered in R.A. Casting (supra), 21. There can be no dispute on the fact that in adjudication proceedings, the charge of clandestine removal is definitely to be established on the basis 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1- (274) ELT 248 (Tri-Bang.) similar order based on power consumption was held unsustainable and the appeal was allowed after considering inter alia the judgments 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 in the facts of the instant case in all the appeals. 19.4 The common order was passed by the CESTAT on 30-07-2006 as per the majority opinion allowing the appeals filed by the assessee and other appellant companies. The copy of the majority order is placed at Page Nos. 5 and 6 of the P/B VI. It is pertinent to note here that the Ld. Commissioner has also considered the investigation made by the DGCEI against some brokers and in consequence the show cause notices (SCN) were issued to the assessee and other companies and the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der has taken in to consideration said matter while determining the value of the alleged suppressed production and has observed as under: 19. There are other instances of central excise violations detected by other agencies where the assessee was found to be involved. In one instance that assessee had approached the Settlement Commission, admitted the evasion offence of an identical nature and had obtained immunity from criminal proceedings. The assessee has however argued that each case has to be treated as a separate case based on its own merit 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. 33. 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 Department as well as the adjudication order passed by the CCE, Aurangabad, which in turn, had been cancelled by the Third Member of CESTAT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation 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 Ld. 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 appellate forum under the Custom Act 1962 and Central Excise Act 1944 and we cannot sit as revisionary authority or make any observation whether that order is right or wrong. 35. The Tribunal held that CESTAT was an appellate forum under the Customs Act, 1962 and Central Excise Act, 1954 and the Tribunal (Income-tax) could not act as revisionary authority or make any observation whether that order was right or wrong. 36. The Tribunal further referred to search and seizure operations carried out under 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 appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and findings of the Tribunal which are as under: 31. In the present case, the search was initiated on 17th March, 2006 in the residential and business premises of SRJ Peety Group, Jalna covering the premises of the assessee company as well. Prior to the search, the returns of income for the asst. yrs. 2000-01 to 2005-06 had already been filed under s. 139(1) of the Act 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 Revenue. The tax audit report also contained the unit production of each year which were accepted year after year along with the returns and no query was ever raised by the Department. The following chart shows the year-wise production vis-a-vis electricity consumption which has been placed before the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment in the manner provided in s. 144. Sec. 145 gives the power to AO to reject the books in certain circumstances after considering the following aspects: (a) Whether the assessee has regularly employed a method of accounting? (b) Whether the annual profits can be properly deduced from the method employed? (c) Whether the accounts maintained are correct 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 in the whole year and treated the production in that month as the correct production and then proceeded to arrive at his production figure by multiplying the production in the books by the ratio of production to the electricity consumption for the month in which electricity consumption was minimum. The method of computing the so-ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 had already been filed u/s. 139(1) of the Act, accompanies by all requisite documents and proceedings. The scrutiny was thus completed. During the course of search, no incriminating material was found relating to the said years, which could have been added in the proceedings u/s. 153A. The details regarding the consumption of electricity for the production for each of the year under consideration was placed before the Authorities in the Director s Report of each year. The same has not been disputed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the appeal in M/s. SRJ Peety Steels Pvt. Ltd, in turn, relying on the ratio laid down by coordinate Bench of the Tribunal, deleted the addition made on account of alleged suppression of production / 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 Customs, Excise Service Tax Appellate Tribunal with principal Bench at New Delhi (supra). The copy of the order of the Customs, Excise Service Tax Appellate Tribunal is placed on record by the learned A.R. for the assessee. The Customs, Excise Service Tax Appellate Tribunal after considering the factual aspects of the case, the quantum of production, the consumption of electricity observed that there is nothing on record to show that high power connection supported by evidence was made on a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in assessee's own case there is no merit in any addition being made in the hands of the assessee on account of the alleged suppression in production and also alleged investment in purchase of raw material. In view thereof, we hold that no addition on account of profit on the sale of unaccounted production or on account of unexplained investment merits to be made in the hands of the assessee. We are also in agreement with the observations of CIT (Appeals) in deleting the aforesaid addition as no independent evidence has been brought on record to establish 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. The Ld. CIT(A) allowed the assessee s appeal. The Revenue challenged the order of Ld. CIT(A) before the Tribunal. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 are of ₹ 39,20,36,546/- and the said investment required for production out of books, therefore, worked out ₹ 37,69,582/-. In fact, the said addition is made by the Ld. CIT(A) as he has confirmed the alleged suppression of production/sales as held by the Assessing Officer. As the assessee has succeeded in getting the relief by deleting the entire additions towards alleged suppression of production and sales, hence, this addition does not survive and said addition is also deleted. We, accordingly, allow the Ground No. 10 taken by the assessee. 39. 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 hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rked out the addition on the basis of erratic consumption of electricity as determined by CCE, Aurangabad. Following the same line of reasoning as in the order of M/s. SRJ Peety Steels Pvt. Ltd. (supra), we find no merit in the addition made in the hands of the assessee on surmises. Both the learned Authorized Representative for the assessee and Ld. Special AR has raised identical arguments as in M/s. SRJ Peety Steels Pvt. Ltd. (supra) and since the Tribunal has already decided the issue in M/s. SRJ Peety Steels Pvt. Ltd. (supra), the ratio of the said decision is applicable to the facts of the present case. However, additional production relating to the declaration made before the Settlement Commission is to be added in the hands of the assessee, as admitted by the learned Authorized Representative for the assessee. 42. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of assessment proceedings, but no other investigation or inquiry was made by the Assessing Officer while completing the assessment in 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 ingots / billets. The basis for such assumption was the electricity consumption, for which the Assessing Officer placed reliance on the report of Dr. Batra and order of CCE, Aurangabad. The Assessing Officer applying the formula worked out the suppressed production and sales in the hands of the assessee. We in the paras hereinabove have already adjudicated the issue that no addition on account of suppressed production / sales on such account could be made in the hands of the assessee. The Ld. Special AR on the other hand, stressed that where the Assessing Officer had the information of alleged clandestine removal of material without payment of Excise duty and also because of the admission of the assessee before the Assessing Officer, the sales for the period of 300 days should be extrapolated in the hands of the assessee. He stressed that even where the evidence of clandestine removal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n before the Settlement Commission, was before the Assessing Officer, even additional income on such offer of settlement was offered by the assessee before the Assessing Officer, however, no further inquiry, investigation or action was taken by Assessing Officer in this regard. In the absence of the same, the issue raised in the present appeal is whether any extrapolation of sales for the balance year on the basis of evidence found for the part of the year is justified or not. The answer, in our opinion, has to be in negative. 46. 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 during the course of search, which were admitted by the assessee to reflect suppression of sales. On the basis of aforesaid documents, the income for the year was extrapolated, which order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 48. Following the same analogy of reasoning, where the evidence of clandestine removal of material without payment of Excise duty has been found by the Excise Department, in respect of sale of goods for a particular quantity and for a particular period, the same could not be relied upon as evidence, while extrapolating the sales and the additional income thereon in the hands of the assessee during the Income-tax proceedings. The Assessing Officer does not have any evidence for suppressed production and even after the order of Settlement Commission, the Assessing Officer had not investigated or brought any material on record establishing suppressed production and / or its sale outside the books of account. 49. 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 Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rick Works vs. CIT (supra), wherein it has been held that mere existence of evidence of concealment in the next assessment year could not be the basis for estimating income in any other assessment years. 53. Further, before the Hon ble Delhi High Court in CIT Vs. Anand Kumar Deepak Kumar (supra), the issue was in relation 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. 54. Similar proposition has been laid down by the Hon ble Bombay High Court in CIT Vs. C.J. Shah and Co. (supra). 55. Further, the Bilaspur Bench of the Tribunal in Chattisgarh Steel Casting Pvt. Ltd. V. ACIT (supra) decided similar issue of the information available with the Central Excise Department, wherein unaccounted sales was estimated for 56 days and the Assessing Officer estimated the sales for the remai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and seizure operation was carried out against the assessee, but the assessee claims that in order to buy peace of mind, it had declared the said amount by way of petition before the Settlement Commission. The said offer made by the assessee was accepted in toto. It may be noted that the Excise authorities have the power to re-visit the offer made by the assessee, in case, any adverse material is available against the person making the offer. It may also be noted that the Settlement accepted in the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessment under section 148 of the Act. Once a particular fact was available with the Assessing Officer, which was taken note of and considered 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 accepted in toto by the Settlement Commission, no further addition could be made in the hands of the assessee on this ground, in the absence of any inquiry or investigation by the Assessing Officer. Accordingly, the reliance placed upon by the Ld. Special AR in assessee s own case reported in 137 TTJ 627 [Pune] is mis-placed and there is no merit in the arguments of the Ld. Special AR in this regard. 58. Another plea raised by the Ld. Special AR was that income could be estimated/ taxed on the theory of preponderance, in turn relying on the ratio l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the Assessing Officer and where the Assessing Officer has failed to collect additional evidence, no addition can be made in the hands of the assessee, by way of extrapolation of sales for 300 days on account of any evidence found in any preceding or succeeding years. Further, no addition can be made in the hands of the assessee, where no petition has been filed by the assessee before the Settlement Commission in any of the respective years or before the Excise authorities. In the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there is no investigation by DGCEI and hence, no addition on account of extrapolation can be made, in the absence of any evidence found against the assessee. 60. 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 invest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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