2018 (9) TMI 880 - HC - Income Tax

Addition of suppressed sale - additions of income made on the basis of SCN issued under the Central Excise - assessee contended that proceedings under central excise could not be finalized - Held that - As decided in VRUNDAVAN CERAMICS PVT. LTD. 2018 (5) TMI 1274 - GUJARAT HIGH COURT by merely producing the copies of the statements of the witnesses accompanying the show-cause notices, such statements and the veracity thereof does not get automatically established. AO merely cosmetically gave an opportunity to the assessee to meet with such allegations, virtually, shifting the burden of proving the evasion of duty that had taken place on the assessee. We have perused the entire order of assessment. There is no independent material brought on record by the Assessing Officer other than those which were already collected by the Excise department and which, as noted earlier, are yet to be verified. - decided against revenue

Summary

Issues Involved:
1. Interpretation of section 145 of the IT Act regarding rejection of book results.
2. Deletion of addition based on suppressed sales using material from Excise Department.

Interpretation of Section 145 of the IT Act:
The judgment dealt with the interpretation of section 145 of the IT Act, which allows the rejection of book results if the assessing officer is not satisfied with the correctness or completeness of the accounts. The issue raised was whether the Appellate Tribunal was justified in not appreciating this provision. The court analyzed a previous case involving a registered dealer under the Gujarat Value Added Tax Act who was served with a show-cause notice by the Excise Department for allegedly suppressing sales. The court emphasized the need for further verification beyond show-cause notices before framing assessments. It was highlighted that the mere issuance of a show-cause notice by the Excise Department does not automatically imply evasion of tax, and the assessing officer must have sufficient material to believe in tax evasion.

Deletion of Addition Based on Suppressed Sales:
The second issue involved the deletion of additions made on account of suppressed sales using material collected by the Excise Department. The court examined whether the assessing officer had enough material to justify the additions. It was noted that the assessing officer primarily relied on the show-cause notices and statements from the Excise Department without further verification. The court emphasized that the assessing officer should not shift the burden of proving tax evasion solely onto the assessee. The judgment highlighted the importance of independent material in assessments and the need for thorough verification before making additions based on allegations. Additionally, the court dismissed the reliance on a judgment of the Customs, Excise, and Service Tax Appellate Tribunal due to differences in circumstances and legal provisions.

Overall, the court dismissed the Tax Appeals, emphasizing the importance of proper verification and independent material before making additions based on allegations of tax evasion. The judgment underscored the assessing officer's responsibility to have sufficient grounds for additions and not rely solely on show-cause notices without further substantiation.