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2015 (1) TMI 1228 - AT - Income TaxReopening of assessment - suppression of production/sales - 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? - AO has determined alleged suppression of the production/sales as determined the Commissioner of Central Excise and Custom, Aurangabad on the basis of power consumption - difference of the opinion between the Ld. Members of the CESTAT - Held that - On perusal of the assessment orders it is clear that both the assessments are merely based on the alleged suppression of the production by estimating certain consumption of electricity i.e. 1026 Units for manufacturing of 1 MT of Ingots and Billets. Moreover, even if in the A.Y. 2008-09, the Assessing Officer has observed that the information received from the Central Excise Authorities has no bearing in the said order but on the perusal of the said order, it is seen that entire order is copy of order passed for the A.Y. 2007-08. As vary basis of the assessment order i.e. the order of the Commissioner of Central Excise (CCE), Aurangabad has been set aside and cancelled by the CESTAT, in our opinion the assessment orders passed by the Assessing Officer and confirmed by the Ld. CIT(A) approving the estimated alleged suppression of the production/sales have no legal legs to stand. when there is a difference of the opinion between the Ld. Members of the CESTAT then the matter is referred to Ld. Third Member and after the issue or point/s of difference referred to Ld. Third Member has been decided then the majority order is passed on the basis of majority opinion which is a legal order and minority order is not a legal order in the eye of law. In the case of the assessee company entire matter of alleged suppression of production was referred to the Ld. Third Member of the CESTAT and not only any specific point and this position is clear from the questions or points referred to Ld. Third Member. We, therefore, reject the argument of the Ld. Spl. AR for the Revenue that we have to also consider the minority order of the Ld. Technical Member of the CESTAT 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, 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. We find that the only reason for rejection of the books of account was the alleged suppression of production/sales and which was determined on the basis of the adjudication order passed by the CCE, Aurangabad as well as the consumption of the electricity used in the manufacturing of the Ingots/Billets relying on the technical opinion of Dr. Batra, IIT, Kanpur. No other reasons are given by the Assessing Officer. We have already held that the Assessing Officer was not justified in making the additions towards alleged suppression of production/sales. We, therefore, hold that the rejection of the books of account on above reason cannot be upheld. - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings initiated by the Assessing Officer under Section 147 of the Income-tax Act. 2. Alleged suppression of production/sales and the corresponding additions made by the Assessing Officer. 3. Rejection of the books of account under Section 145(3) of the Income-tax Act. 4. Estimation of gross profit on alleged suppressed production/sales. 5. Addition for undisclosed investment in respect of undisclosed turnover. Detailed Analysis: 1. Validity of Reassessment Proceedings: The assessee challenged the reassessment proceedings initiated by the Assessing Officer under Section 147 of the Income-tax Act for A.Y. 2007-08, arguing that there was no compliance with Section 143(2). However, these grounds were not pressed by the assessee and were dismissed as not pressed. 2. Alleged Suppression of Production/Sales: The core issue in both appeals was the addition made by the Assessing Officer for alleged suppression of production/sales, amounting to Rs. 39,20,36,546/- for A.Y. 2007-08 and Rs. 40,75,72,486/- for A.Y. 2008-09. The Assessing Officer based these additions on the investigation carried out by the Central Excise Authorities, particularly the intelligence gathered by the DGCEI and the adjudication order by the CCE, Aurangabad, which suggested that the assessee indulged in clandestine removal of goods without paying excise duty. The Assessing Officer referred to the technical opinion on electricity consumption for production and concluded that the assessee suppressed production based on higher electricity consumption. The Tribunal noted that the entire basis for the addition was the order of the CCE, Aurangabad, which had been set aside by the CESTAT, Mumbai. The Tribunal emphasized that no independent investigation was conducted by the Income Tax Authorities for the assessment years in question. The Tribunal concluded that the additions made on the basis of electricity consumption were not sustainable, especially since the CESTAT had quashed the adjudication order of the CCE, Aurangabad. 3. Rejection of Books of Account: The Assessing Officer rejected the books of account under Section 145(3) of the Income-tax Act, citing that the books did not reflect the true and correct picture of the manufacturing results due to alleged suppression of production. The Tribunal held that the rejection of the books of account was unjustified, as it was primarily based on the now-invalidated adjudication order and the technical opinion on electricity consumption. The Tribunal allowed the grounds challenging the rejection of the books of account. 4. Estimation of Gross Profit: The CIT(A) had directed the Assessing Officer to estimate the gross profit at 4% on the value of alleged suppressed production/sales. However, since the Tribunal deleted the entire additions towards the alleged suppression of production and sales, the issue of estimating gross profit became infructuous. 5. Addition for Undisclosed Investment: The CIT(A) had made an addition of Rs. 37,69,582/- for undisclosed investment in respect of undisclosed turnover. This addition was based on the confirmation of alleged suppression of production/sales. Since the Tribunal deleted the entire additions for suppression of production/sales, this addition also did not survive and was deleted. Conclusion: The Tribunal allowed the appeals filed by the assessee, deleting the entire additions made towards alleged suppression of production/sales and the corresponding additions for undisclosed investment. The Tribunal also held that the rejection of the books of account was unjustified. Consequently, the appeals filed by the Revenue were dismissed.
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