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2019 (7) TMI 547 - HC - Income TaxRejection of books of accounts - AO is not satisfied about the correctness or completeness of the accounts of the assessee - addition made on account of suppressed sale by using the material collected by the Excise Department; including the statements of relevant witnesses recorded during the search - HELD THAT - As decided in VRUNDAVAN CERAMICS PVT. LTD. 2018 (5) TMI 1274 - GUJARAT HIGH COURT as held excise show-cause notices in case of the present assessee are yet to be adjudicated. What would be the material on record during such proceedings is not possible for us to foresee. Secondly the Tribunal has mainly proceeded on the basis of absence of section 4A of the Central Excise Act at the relevant time which in the opinion of the Tribunal alone could have permitted the department to substitute the sale price by the transaction value of the goods. Such is not the case in the present group of cases. We would therefore be well advised to clear such controversy. - Decided against revenue
Issues Involved:
1. Justification of the Appellate Tribunal in not appreciating the provisions of section 145 of the Income Tax Act, 1961. 2. Deletion of addition made on account of suppressed sale using material collected by the Excise Department. 3. Decision of the Appellate Tribunal against the Revenue despite setting aside the issue to verify the finality of proceedings by the Excise Department. Detailed Analysis: Issue 1: Justification of the Appellate Tribunal in not appreciating the provisions of section 145 of the Income Tax Act, 1961 The Revenue questioned whether the Appellate Tribunal was justified in law and on facts in not appreciating the provisions of section 145 of the Act, which requires rejecting the book results of the assessee where the assessing officer is not satisfied about the correctness or completeness of the accounts. The Tribunal, however, did not find sufficient grounds to reject the book results of the assessee based on the material provided by the Excise Department. The Tribunal's decision was influenced by the lack of independent verification and finality of the Excise Department's findings. Issue 2: Deletion of addition made on account of suppressed sale using material collected by the Excise Department The Revenue contended whether the Tribunal was justified in deleting the addition made on account of suppressed sales, which was based on the material collected by the Excise Department, including statements of relevant witnesses recorded during the search. The Tribunal observed that the materials collected by the Excise Department were not independently verified and the statements were not cross-examined. The Tribunal emphasized that the show-cause notices issued by the Excise Department had not yet culminated into final orders, thereby rendering the material insufficient for making additions. Issue 3: Decision of the Appellate Tribunal against the Revenue despite setting aside the issue to verify the finality of proceedings by the Excise Department The Revenue questioned whether the Tribunal was justified in deciding the tax appeal against the Revenue despite setting aside the issue with a direction to verify the finality of proceedings by the Excise Department. The Tribunal noted that the Assessing Officer had relied heavily on the show-cause notices issued by the Excise Department without any independent verification or additional material. The Tribunal found that the Assessing Officer had not brought any independent material on record beyond what was collected by the Excise Department, which was yet to be verified. Conclusion: The High Court, referencing the coordinate bench's judgment in the case of Principal Commissioner of Income Tax, Rajkot-3 Vs. Vrundavan Ceramics (P.) Ltd., concluded that the issues raised by the Revenue were no longer res integra. The Court dismissed the appeals, agreeing with the Tribunal's view that the material collected by the Excise Department was insufficient for making additions without independent verification and final adjudication. The Court emphasized that the Assessing Officer's reliance on unverified show-cause notices was inadequate for rejecting the assessee’s books of accounts and making additions. Consequently, both tax appeals were dismissed.
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