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TMI Blog2015 (8) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No. Name of Assessee Date of order of the CIT (A), Aurangabad Asstt. Year 1. ITA Nos.219 to 221/PN/2012 Rhishi Steel and Alloys Pvt. Ltd. 30-12-2011 2006-07 to 2008-09 ITA Nos.414 to 416/PN/2012 2. ITA Nos.216 to 218/PN/2012 Jailaxmi Casting and Alloys Pvt. Ltd. 30-12-2011 2006-07 to 2008-09 ITA Nos. 418 to 420/PN/2012 3. ITA Nos.224 to 226/PN/2012 Mauli Steel Pvt. Ltd. 30-12-2011 2006-07 to 2008-09 ITA Nos.402 to 404/PN/2012 4. ITA Nos. 227 to 230/PN/2012 Gajlaxmi Steel Pvt. Ltd. 09-01-2012 2005-06 to 2008-09 ITA Nos.676 to 679/PN/2012 5. ITA Nos.243 and 244/PN/2012 Adinath Concast Pvt. Ltd. 06-01-2012 2006-07 & 2007-08 ITA Nos. 636 and 637/PN/2012 6. ITA Nos.258 to 261/PN/2012 Saptashrungi Alloys Pvt. Ltd. 06-01-2012 2005-06 to 2008-09 ITA Nos.680 to 683/PN/2012 7. ITA Nos.279 to 281/PN/2012 Meta Rolls & Commodities Pvt. Ltd. 30-12-2011 2006-07 to 2008-09 ITA Nos.408 to 410/PN/2012 2. First we take up ITA No.219/PN/2012 filed by the Assessee and ITA No.414/PN/2012 filed by the Revenue. Facts of the case, in brief, are that the assessee is a Private Limited Company engaged in the business of manufacturing of Ingots/Billets. It fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse to the same, the assessee by and large reiterated the stand taken before the Commissioner of Central Excise and Customs, Aurangabad which according to the AO is not on sound footings and which was rejected by the Commissioner of Central Excise and Customs. In view of the above, as also the detailed comparative analysis of data prepared from the assessee's books of accounts, peer analysis and details furnished the AO held that it is apparent that the rate of units of electricity per metric tonne adopted by the Commissioner of Central Excise and Customs, Aurangabad is very much reasonable, fair and justified. He accordingly concluded that the rates for calculation of suppressed production in assessee's case adopted by the Commissioner of Central Excise and Customs, Aurangabad are absolutely reasonable. He therefore adopted the same for the purpose of calculation of unaccounted production of finished goods. The AO further was of the opinion that the books of account of the assessee do not reflect the true and correct picture of manufacturing results for which he rejected the same by invoking the provisions of section 145(1) of the I.T. Act. Accordingly, the AO made addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise is based on estimates, academic study and theoretical calculations and hence is challenged by the assessee before CESTAT. (4) The Central Excise Department has actually verified electricity consumption in appellant's plant which was found to be in order. The Excise Department should have worked out the electricity units required for producing one Metric Ton MS ingots/billets by actual physical verification in the plants of various manufacturers. (5) The reliance placed by the Commissioner of Central Excise in its order on the report of I.I.T., Kanpur and technical report of Dr.Batra is misplaced as the copies of the said reports were neither given to the appellant nor any cross examination was allowed. (6) The Executive Director, All India Furnace Association vide his report dated 18/03/2008 has stated that the higher consumption of electricity can be attributable to light scrap and sponge iron etc. reasons. (7) The Excise Department has considered entire electricity units for production whereas about 75% units are consumed for furnace i.e. for production. (8) The reliance is placed on the decision in the case of ACIT Vs. SRJ Peety Steels Pvt.Ltd. (2011) 137 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated, after considering various reports and studies in respect of electricity consumption required for producing MS ingots/billets, at 1026 electricity units per Metric Ton. (4) The A.O. has also pointed out that there is substantial variation in various months and in respect of various manufacturers of MS ingots/billets in electricity consumption required for the quantum of goods produced, which is abnormal. The A.O. has also noted substantial variation in yield and shortages during various months in the years under appeal. (5) The decision in the case of ACIT Vs. SRJ Peety Steels Pvt. Ltd./Shree Om Rolling Mills Pvt. Ltd. (2011) 137 TTJ 627 (Pune) has been relied on by the appellant. The facts before the Hon'ble ITAT while deciding the said cases were "Afferent to some extent. In the said cases, clandestine removal of goods by the appellant and the admission of the appellant about the said fact of unaccounted transactions was not before the Hon'ble ITAT. Further, the detailed order of the Commissioner of Excise and the other facts brought on record by the A.O. in the assessment order was not before the Hon'ble ITAT, Pune while deciding the above referred cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary load was only 7. 8% of the total sanctioned load but claimed to be 25% by appellant in statement; (c) Commissioner of Income Tax (Appeals)' confirmed net addition of Income of Rs. 23.5 lakhs on account of suppressed production of ingots for assessment years 2001 -02 to 2006-07. (d) Clandestine clearance for specific case admitted before Settlement Commission. Similar observations have been made by the Hon'ble Appellate Tribunal in the case of other manufacturers. The Hon'ble CESTAT has also taken support of decision of Hon'ble Madras High Court in the case of Alagappa Cement Pvt. Ltd. Vs. CEGAT & CCE, Trichy (2010-TIOL-770-HC-MAD-CX) and held that the Revenue cannot be faulted for demanding duty on the steel ingots which could have been manufactured by consuming excess quantity of electricity. The Hon'ble Appellate Tribunal has held in concluding para-22 that "none of the appellants except M/s Shree Steel Castings has made out the prima-facie case on merits. They cannot raise a valid plea of limitation either. Suppression of relevant facts is inbuilt in clandestine production of Excisable goods and its removal without payment of duty, and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessor of IIT, Kanpur i.e. on presumption and assumption and without any evidence of purchase of raw material or sales of finished products out of books. 6. The learned Commissioner of Income Tax (Appeals) further erred in confirming the alleged suppression of production on the grounds of monthly variation in consumption of electricity vis-a-vis production. 7. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in holding that the books of accounts of the appellant company are correctly rejected u/s. 145 of the Income Tax Act without any evidence or finding as to how the provisions of Section 145(3) are satisfied. 8. The learned Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in making an addition on account of alleged suppression of sales without giving any show cause notice to the appellant company to explain the facts against the proposed huge addition on this account which is against the rules of natural justice. 9. The learned Commissioner of Income Tax (Appeals) further erred in confirming the addition on account of Gross Profit @ 4% on the alleged sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where both of us are parties. We find the Tribunal considering the arguments advanced by both the sides deleted the addition made on account of erratic consumption of electricity and the alleged investment in the purchase for effecting such unaccounted sales. The appeal filed by the Revenue challenging the application of GP rate and allowance of expenses are also dismissed by the Tribunal. The relevant observation of the Tribunal from para 17 onwards reads as under : "17. We have heard the rival contentions and perused the record. The Ld. AR for the assessee filed argument synopsis and Ld. Spl. AR for the Revenue also has filed notes of his argument which are placed on record. We have also considered all the precedents and decisions relied on by both the Parties. 18. Before addressing the issue on merits, we would like to make a mention of the proceedings before the Bench of the present cases listed before us, which were made vide order sheet entry dated 07.05.2015. The present appeals were fixed for hearing initially on 10.03.2015 and were adjourned at the request of the Special AR for the Revenue as he was not ready to argue the appeals. The reasons stated in the letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 and ITA No.1638/PN/2012 were heard. All the other appeals are adjourned to 08.05.2015 as part heard. 20. On 08.05.2015, on calling of the matters, we find that the Ld. Special AR is not present in the Court room and there is no intimation about his absence in the bunch of matters, which are listed for hearing. The CIT-DR was present and was asked to explain his absence. In reply she stated that she had no intimation. In view of continued defiance of the Ld. Special AR in yesterday's hearing and his non-appearance in today's hearing, conduct of the Ld. Special AR is to be taken note of. The CIT-DR was informed in the Bench as to why costs should not be imposed on the Department for his continued defiance and for interrupting proceedings of the Bench. The hearing is to continue in the listed matters as annexed on 13.05.2015 as part-heard. 21. On 13.05.2005, Shri J.P. Bairagra was present for the assessee and Shri Sunil Ganoo, Ld. Special AR, Smt. M.S. Verma, CIT-DR & Shri Rajesh Damor were present for the Department. The matter was finally heard on 14.05.2015 when Shri J.P. Bairagra present for the assessee and Shri Sunil Ganoo, Ld. Special AR, Smt. M.S. Verma, CIT-DR & Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-service of notice under section 143(2) after recording of reasons under section 147 of the Act. However, in some cases, the assessment has been completed under section 143(3) of the Act and there are no issues against re-opening of the assessment. The Ld. Authorized Representative for the assessee in the present bunch of appeals relating to Bhagyalaxmi Steel Alloys Pvt. Ltd. at the outset stated that the grounds of appeal Nos.1, 2 and 10 in relation to re-opening of the assessment under section 147 and non-supply of reasons for re-opening under section 147 of the Act, are not pressed. Hence the same are dismissed as not pressed. 26. The next issue is the working of the suppressed production and the application of GP rate of 4% on such suppressed production and third is the working capital required for investment in such suppressed production. We find that similar issue of addition on account suppressed production on account of erratic consumption of electricity arose before the Tribunal in the case of SRJ Peety Steel Pvt. Ltd. (supra). Though both the parties have raised their arguments in favour of/against the order of the Tribunal in SRJ Peety Steel Pvt. Ltd. (supra), we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The other aspects of the issue that the assessee therein had made the petition before Settlement Commission in respect of clandestine removal of material without payment of Excise duty, was also considered by the Tribunal and in the absence of any inquiry / investigation or material collected by the Assessing Officer, the Tribunal held that there was no merit in any addition in the hands of the assessee in assessment year 2007-08. Further, in assessment year 2008-09, there was no admission of any clandestine removal of material without payment of Excise duty before the Settlement Commission and in the absence of any other inquiry or investigation being carried out by the Assessing Officer or any other evidence being brought on record, the Tribunal held that no addition is warranted in the hands of the assessee. The issue before the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. was summarized under para 9, which reads as under:- "9. At this stage we are not considering the appeals filed by the Revenue for the reason that those appeals are against the finding of the Ld. CIT(A) that the entire value of alleged suppressed production/sales of Ingots and Billets cannot be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Y. 2007-08 against the assessee company u/s. 147 of the Act. In reasons recorded by the Assessing Officer while issuing the notice to the assessee company u/s. 147 for A.Y. 2007-08 the Assessing Officer gave reference of the communication and order of the CCE Aurangabad received from the Central Excise office at Aurangabad. 14. The Assessing Officer has also referred to one matter in respect of the action conducted by DGCE (Intelligence) against the few brokers and subbrokers who were involved in the trading into the Ingot/Billets and TMT Bars. The Assessing Officer also referred to the petition filed by the assessee before the Central Excise and Custom Settlement Commission, Mumbai Bench, Mumbai for waiver of penalty, interest and for getting immunity from a prosecution. The Assessing Officer proceeded to decide the alleged suppression of production by the assessee admittedly which was based on the information received from Central Excise Authority as well as the adjudication Order of the CCE, Aurangabad. It is pertinent to note here that in this case that there was a search and seizure action against the assessee and its group companies by the Income-tax Dept. on 17-03-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the entire evidence was destroyed by them and they used to get the commission of Rs. 100/- per MT. The Assessing Officer has discussed the information gathered by the DGCEI, Zonal Unit, Mumbai in Para Nos. 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 & 2.7 of the assessment order. So far as action against the brokers and subbrokers are concerned the Central Excise Authority issued show cause to the assessee as well as the other manufacturers who were involved in clearing the excisable goods without payment of duty. All the manufacturers of the Ingots/Billets and TMT Bars were based in Jalna and the assessee is one of them. As per the investigation done by the Central Excise Authorities, the assessee who is manufacturing of Ingots/Billets supplied 288.500 MT. to Shri Om Rolling Mills Pvt. Ltd. which is engaged in the manufacturing of TMT Bars. The Assessing Officer also referred to a statement of Shri Surendra S. Peety, Managing Director of the assessee recorded on 12-01-2007, by the DGCEI who allegedly admitted that the goods supplied to Shri Om Rolling Mills Pvt. Ltd. i.e. Ingots/ Billets, were removed clandestinely without payment of excise duty and the said material was to extent of 275 MTs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 4.3 of the assessment order). 17. The Assessing Officer also rejected the books of account of the assessee u/s. 145(3) of the Income-tax Act by giving the reason that the assessee has not given the true and correct picture. The Assessing Officer adopted the suppression of production determined by the CCE, Aurangabad as per his adjudication order and held that the assessee has suppressed the production and accordingly, worked the suppressed production of the A.Y. 2007-08 as under: A.Y. Suppressed Production M.T. Rate per M.T. Rs. Assessable Value of Suppressed Production Rs. 2007-08 20,751 18,892 39,20,37,546 2008-09 29,276 21,444 40,75,72,486 18. In the A.Y. 2007-08, the Assessing Officer gave the set off of Rs. 8,44,01,504/- which was in respect of the addition made by the Assessing Officer while completing the assessment u/s. 143(3) of the Act in the order dated 31-12-2008 and made the net addition of Rs. 30,76,35,042/-. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion Report" the consumption of electricity for manufacture of one metric ton of steel ingots varies between 555 to 1026 electricity units depending upon the thermal efficiency, electricity efficiency and nature of mix of raw material. As observed by the Ld. CCE in the case of the assessee as per their electricity bills, the average consumption of electricity for manufacture of 1 MT of MS Ingots varies from 1454 to 1856 units. 19.1 He relying on the Technical report of IIT, Kanpur the Ld. Commissioner observed that on calculating the production of M.S. Ingot/Billets on the basis of consumption of 1026 units (Maximum Limit) of electricity for per MT of MS Ingots produced, it is noticed that there is a huge difference in the actual/normal production and the recorded figures in the assessee's records. The Ld. CCE accordingly, observed that the assessee has willfully suppressed the figures of production of Billets/MS Ingots in their 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Vice President correctly opined that the judgment in R.A. Casting (supra) is squarely applicable in the facts of the instant appeals. In R.A, Casting the electricity consumption was 2072 to 2443 units per MT, which is higher than the average electricity consumption in the instant appeals. 20.1 The Commissioner in the orders impugned in the instant appeals was having the following reports and clarifications for his consideration- (i). 555 to 1046 units PMT as per Dr. Batra's report; (ii). 1800 units PMT as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii). 1427 units per MT as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv). 650 to 820 units/MT as per Article of the Executive Director, All India Induction Furnace Association, New Delhi (Mr. Varshney); (v). 1000 to 1800 units per Ton or even higher, as per Letters 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 Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to- (i). Receipt of raw material inside the factory premises, and non-accounting thereof in the statutory records; (ii). Utilization of such raw material for clandestine manufacture of finished goods; (iii). Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, .discrepancy in the stock of raw materials and final products; (iv). Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the impugned order cannot be sustained." 20.8 In the present appeals, none of the so called other evidences referred in the impugned Orders prove clandestine clearance. The primary evidence of department is admittedly excess electricity consumption based on benchmark adopted allegedly-'from report of Dr. Batra, which was already held to be arbitrary by Hon'ble Tribunal in RA casting (supra). Thus, in my opinion the primary evidence relied in the impugned Order is itself inadmissible, and no other evidence in the instant case proves clandestine production and clearance to sustain, the demand, It is contended by Revenue that furnaces installed in the factory of present appellants were in sound condition as compared to R.A. Casting (supra), however I neither could find any material in support of this argument, nor any such finding in the Orders impugned in the appeals. 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 mathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was applied in subsequent assessment years 2001-02 and 2002-03.This was followed by the Sales Tax Tribunal in the order cited by Revenue. In the case of Rajmoti Industries, facts of the case are that for the assessment year 2005-06, the Assessing Officer rejected the books of accounts of the assessee and made various additions, not only for the reason of unexplained wide fluctuations in the productivity as compared to that in A.Y. 2004-05, but also because the assessee therein had not recorded the work-inprogress in the books of accounts. I am therefore of the opinion that these cases, apart from being under Statutes other than Central Excise Act, do not any manner help in sustaining the findings recorded in the impugned Order. In none of these cases any theoretical repot was relied for arriving at deemed production. 24. Further, in Sarvana Alloys Steels Pvt Ltd, 2011- (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 fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Commission passed in the case of set of companies. The Tribunal noted that the CCE, Aurangabad in its order had taken into consideration the said material while determining the value of alleged suppressed production and had made observations vide para 19. The relevant observations of the Tribunal in M/s. SRJ Peety Steels Pvt. Ltd. (supra) were as under:- "20.1 .........the Ld. Technical Member of the CESTAT. The Ld. Spl. AR for the Revenue also referred to the order of the Settlement Commission, Mumbai passed in the case of the assessee and other companies. It is true that the assessee approached the Settlement Commission when on the basis of investigation made by the DGCEI against some of the brokers and sub-brokers dealing in the Ingots/Billets and TMT Bars show cause notice was issued to the assessee company and matter was settled. Ld. CCE, Aurangabad in his order 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication Order passed by the CCE, Aurangabad has been cancelled by the CESTAT, Mumbai by majority opinion and hence, foundation of assessments for A. Yrs. 2007-08 & 2008-09 do not exist. The law is also well settled that when the assessee files an appeal challenging an order of the lower authority before the higher appellate authority then the entire order gets merged with the order of the higher appellate forum which in the present case is CESTAT. Moreover, investigation by DGCEI and proceeding before the Settlement Commission has also been considered by the CCE, Aurangabad in his adjudication order. The said order was subject matter before the CESTAT and said order has been set aside. Hence, we do not consider it necessary to deal with decisions relied on by Ld. Spl AR of the Revenue which are in context of admission of the Director of the assessee in the course of investigation 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production which was computed on the basis of consumption of the electricity. The Assessing Officer devised a formula on the basis of electricity consumption and the same was applied uniformly in order to work out certain alleged suppressed production and resultant concealed income in the case of the assessee. The Assessing Officer took 1,600 Units as consumption per MT which was a lowest as shown by the assessee. The Assessing Officer, accordingly, worked out the alleged suppressed production and made the addition in all the years while completing the assessments. In sum and substance the Assessing Officer had simply taken the lowest electricity consumption for a month in a whole year and accordingly worked out the total production as per his formula and on the basis of the formula he worked out the alleged concealed income. There are certain important observations 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoking the provisions of s. 145 of the Act, according to which in case the AO is not satisfied about the correctness or completeness of accounts of the assessee or where no method of accounting provided in sub-s. (1) or accounting standards as notified under sub-s. (2), have not been regularly followed by the assessee, the AO may make an assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue's appeal was dismissed vide common Judgment dated 10-02-2014, in the case of the assessee and other companies by the Hon'ble High Court and there are categorical observations of their Lordships on the estimation of the production based on the consumption of the electricity which are as under: "4. In that regard, the Tribunal 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 y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, no investigation was done by the Revenue after the search and seizure operations in the immediately preceding year, wherein during the course of search, certain loose sheets were found in the residence of the Director to make out case against the assessee for alleged suppression of production / sales. The Tribunal while deciding 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no cogent evidence has been brought on record to prove that the output had been cleared clandestinely. Further it has been held that there was no cogent evidence to show either suppression of purchase of input or removal of goods. In view of the aforesaid findings of the Customs, Excise & Service Tax Appellate Tribunal 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sales and said issue arises from Ground No. 9 in the A.Y. 2007-08 and Ground No. 7 in the A.Y. 2008-09 are on. As the assessee has succeeded on the main grounds as entire additions made by the Assessing Officer are deleted, the Ground No. 9 in the A.Y. 2007-08 and Ground No. 7 in the A.Y. 2008-09 become infructuous. 29. In Ground No. 10, the assessee has raised the objection for making the addition of Rs. 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 Rs. 39,20,36,546/- and the said investment required for production out of books, therefore, worked out Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the report of one Dr. Batra with regard to electric consumption and the Third Member of CESTAT had deleted the aforesaid addition made under the Excise law. Similarly, in the case of assessee before us, there is order of CCE, Aurangabad and of CESTAT and the Assessing Officer worked 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 hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty. The assessee before the Assessing Officer admitted that the additional income in respect of the said clandestine removal of material without payment of Excise duty, is to be added in the hands of the assessee. All this information was available before the Assessing Officer during 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 remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndestine removal of material without payment of Excise duty or suppressed sales for the balance period, in the absence of any evidence found against the assessee for the balance period. 45. Another aspect of the issue is that though the factum of the assessee filing the petition 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 sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Department pursuant to search and seizure action, which indicated clearance in sales, on the basis of which the additional income was added in the hands of the assessee. The said information was forwarded to the Central Excise Department pursuant to which, order 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 broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn against the assessee for extrapolating the same for full year and for the balance year and in other years, other than the year in which the said settlement was offered. In this regard, we find support from the ratio laid down by the Bangalore Bench of Tribunal in Anjaneya Brick 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 Bilaspu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, the said issue of extrapolation of suppressed sales was adjudicated by the Tribunal by observing as under:- "41. Before closing the issue, in the interest of justice, we would like to adjudicate the issue of extrapolation of suppressed sales on account of settlement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial without payment of Excise duty has been made for assessment year 2008-09. The assessee had offered the additional income on account of such clandestine removal of goods before the Assessing Officer for assessment year 2007-08 and the same was the reason for reopening 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andestine removal of material without payment of Excise duty, by the assessee either before the Settlement Commission or before the Excise authorities, in the hands of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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