2015 (10) TMI 2316 - AT - Income Tax

Addition made on account of suppressed production / sales of TMT bars on the basis of electricity unit consumption - CIT(A) quantifying the suppressed production @ 4% as against the addition made by the Assessing Officer on account of the total suppressed production, where the assessee was found to be indulging in clandestine removal of goods without payment of Excise duty - Held that - No extrapolation of sales for 300 days can be made in the hands of the assessee on the basis of the evidence found for clandestine removal of material without payment of Excise duty for few days, which in turn, has been admitted by the assessee by way of filing petition before the Settlement Commission, which in turn, has also been accepted by the Settlement Commission. Merely because the Settlement Commission accepted the claim of the assessee of additional Excise duty payable on the said clandestine removal of material without payment of Excise duty does not establish the case of the Revenue that the said figures of additional production should be utilized for extrapolating the sales in the hands of the assessee for the entire year. Admittedly, the assessee had offered additional income on the said clandestine removal of material without payment of Excise duty, which is to be added as income in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that in case the said additional income has not been added while computing the income in the hands of the assessee for the respective years, the same may be directed to be added in the hands of the respective assessee in respective years. Accordingly, we direct the Assessing Officer to verify from the records for the respective years and include the additional income on account of such admitted clandestine 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. 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 investment in the purchases for effecting such sales which goods have been clandestinely removed, is not sustainable. Accordingly, we hold that no addition can be made in the hands of the assessee on account of alleged investment in purchases under section 69C of the Act One issue remaining to be adjudicated is non issue of notice under section 143(2) after issue of notice under section 148 of the Act. In view of our order in deleting the addition on account of suppressed production/sales, the said issue is dismissed as academic. - Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Non-supply of reasons for reopening the assessment.
3. Non-issue of notice under section 143(2) of the Income Tax Act.
4. Alleged suppression of sales based on electricity consumption.
5. Rejection of books of account under section 145 of the Income Tax Act.
6. Addition on account of alleged suppression of sales.
7. Estimation of undisclosed investments for undisclosed production.
8. Application of Gross Profit rate on alleged suppression of sales.
9. Separate judgments delivered by the judges.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:
The Tribunal noted that the reopening of assessment was based on information received from the office of the Commissioner of Central Excise and Customs (CEC) regarding the assessee's alleged evasion of Excise duty. The Tribunal found that the reopening of the assessment under section 147 was justified as the Assessing Officer had recorded reasons based on tangible material received from the CEC.

2. Non-supply of Reasons for Reopening the Assessment:
The Tribunal observed that the assessee had contended that the reasons for reopening were not supplied. However, the Tribunal did not find merit in this contention as the reasons were based on information from the CEC, which was sufficient to justify the reopening of the assessment.

3. Non-issue of Notice under Section 143(2):
The Tribunal noted that the assessee had raised the issue of non-issue of notice under section 143(2) after the reopening of the assessment. The Tribunal dismissed this ground as not pressed by the assessee, indicating that the issue was not pursued further by the assessee during the proceedings.

4. Alleged Suppression of Sales Based on Electricity Consumption:
The Tribunal found that the addition made by the Assessing Officer on account of alleged suppression of sales based on erratic consumption of electricity was not justified. The Assessing Officer had relied on US standards for electricity consumption, which was not applicable under Indian conditions. The Tribunal referred to the decision in the case of SRJ Peety Steels Pvt. Ltd., where similar additions based on electricity consumption were deleted. The Tribunal held that the addition was based on pure estimates and surmises, and therefore, deleted the addition.

5. Rejection of Books of Account under Section 145:
The Tribunal noted that the rejection of books of account by the Assessing Officer was based solely on the alleged suppression of production and sales determined on the basis of electricity consumption. Since the Tribunal deleted the addition on account of suppressed production and sales, it held that the rejection of books of account was not justified.

6. Addition on Account of Alleged Suppression of Sales:
The Tribunal deleted the addition on account of alleged suppression of sales, holding that the addition was based on conjectures and surmises without any concrete evidence. The Tribunal emphasized that no independent investigation or inquiry was made by the Assessing Officer to substantiate the alleged suppression of sales.

7. Estimation of Undisclosed Investments for Undisclosed Production:
The Tribunal deleted the addition made on account of alleged undisclosed investments for undisclosed production. The Tribunal observed that since the addition on account of suppressed production and sales was deleted, the related addition for undisclosed investments could not be sustained.

8. Application of Gross Profit Rate on Alleged Suppression of Sales:
The Tribunal noted that the CIT(A) had applied a Gross Profit (GP) rate of 4% on the alleged suppression of sales. However, since the Tribunal deleted the addition on account of suppressed production and sales, the issue of applying a GP rate became infructuous.

9. Separate Judgments Delivered by the Judges:
The Tribunal did not mention separate judgments delivered by the judges, indicating that the decision was a consolidated order for the sake of convenience. The Tribunal referred to the facts and issues in related cases to adjudicate the matters comprehensively.

Conclusion:
The Tribunal comprehensively addressed the issues raised by the assessee and the Revenue, ultimately deleting the additions made on account of alleged suppression of production and sales based on electricity consumption. The Tribunal emphasized the lack of concrete evidence and independent investigation by the Assessing Officer, leading to the deletion of related additions for undisclosed investments and the application of GP rate. The Tribunal's decision was guided by the principles laid down in related cases, ensuring a consistent and reasoned approach to the issues at hand.

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