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2016 (5) TMI 409 - AT - Income TaxReopening of assessment - estimation of income in the hands of assessee on account of alleged suppression of production on account of variation in consumption of electricity - assessee Karta, HUF had admitted to the clandestine removal of goods without payment of Excise duty and had paid additional Excise duty on the said amount - Held that - The assessee had shown total disregard to the provisions of the Act. As against the notice issued under section 148 of the Act on 30.03.2010, where the return of income was to be filed within 30 days and assessment was getting time barred on 30.12.2010, the assessee furnished the alleged return of income on 10.11.2010 which is not maintainable and the same is rejected being non-est. Further, we also dismiss the plea of assessee that reassessment is bad in law as the notice under section 148 of the Act was not issued in name of assessee but its sole proprietary concern. The action by Excise authorities was taken against the sole proprietary concern in which clandestine removal of goods without payment of Excise duty were detected and after recording of reasons for reopening under section 147 of the Act, notice under section 148 of the Act was issued and assessment competed, which is as per the provisions of the Act and hence valid. Further, the assessee had participated in assessment proceedings, though had not furnished complete details and / or produced books of account, no prejudice is caused to assessee. We dismiss the plea of assessee in this regard. Accordingly, we find no merit in the grounds of appeal raised by the assessee against re-assessment proceedings The admission of assessee before the Excise authorities that it had made purchases to the value of ₹ 73,84,150/- from its other concern for unaccounted production, we find merit in the claim of assessee that the payments were made to the suppliers of raw material after receiving the sale receipts. This is the plausible explanation and can be accepted in the hands of assessee since the assessee is making the said purchases of Ingots from its concern itself, which was controlled and run by him. However, in respect of other items required for manufacturing in addition to raw material, we find merit in the order of CIT(A) in working out the addition to the extent of ₹ 9,06,132/- and the same is upheld. But no such separate addition was made by the Assessing Officer since the addition was made on account of unaccounted production. However, the CIT(A) had confirmed addition of ₹ 9,06,132/- separately and the same is confirmed. The facts and issues arising in the present appeal are identical to the facts and issue in Shree Om Rolling Mills Pvt. Ltd. Vs. Addl. CIT 2015 (10) TMI 2316 - ITAT PUNE and following the same parity of reasoning, we direct the Assessing Officer to verify from the records for the respective years and include in the hands of assessee, the additional income @ 4% or actual G.P. rate declared by the assessee for that year, whichever is higher, on value of such admitted clandestine removal of material without payment of Excise duty, by the assessee before the Excise authorities. Thus, the assessee is directed to file the requisite details of proceedings before the Excise authorities, before the Assessing Officer in order to compute the additional income in the hands of assessee in the respective years. - Decided partly in favour of assessee
Issues Involved:
1. Reassessment proceedings under section 147/148. 2. Validity of reassessment without notice under section 143(2). 3. Suppression of production based on electricity consumption. 4. Rejection of books of account under section 145. 5. Estimation of Gross Profit (GP) on suppressed production. 6. Addition under section 69C for undisclosed investment. 7. Interest liability under section 234 ABC. Issue-wise Analysis: 1. Reassessment Proceedings under Section 147/148: The assessee challenged the reassessment proceedings initiated under section 147/148 of the Income Tax Act, 1961. The Tribunal upheld the reopening of the assessment, noting that the Assessing Officer had received information from the Central Excise authorities about the assessee's clandestine removal of goods without paying excise duty. The Tribunal found that the Assessing Officer had sufficient reasons to believe that income had escaped assessment and thus, the reassessment proceedings were justified. 2. Validity of Reassessment without Notice under Section 143(2): The assessee argued that the reassessment was invalid due to the absence of a notice under section 143(2) after filing the return in response to the notice under section 148. The Tribunal held that since the return filed by the assessee was invalid and non-est, there was no requirement to issue a notice under section 143(2). The Tribunal emphasized that the reassessment was valid as the assessee had participated in the proceedings and had been given ample opportunity to present its case. 3. Suppression of Production Based on Electricity Consumption: The Tribunal addressed the issue of suppression of production based on electricity consumption. The Assessing Officer had made additions based on the assumption that the assessee's electricity consumption was erratic and not in line with production figures. The Tribunal referred to its earlier decisions, particularly in the case of SRJ Peety Steels Pvt. Ltd., and held that such additions based on electricity consumption alone were not sustainable. The Tribunal noted that the Assessing Officer had relied on US standards for electricity consumption, which could not be directly applied to Indian conditions. 4. Rejection of Books of Account under Section 145: The Tribunal upheld the rejection of the assessee's books of account under section 145, agreeing with the Assessing Officer's view that the books did not reflect the true state of affairs. The Tribunal found that the assessee had admitted to clandestine removal of goods and unaccounted purchases and sales, which justified the rejection of the books. 5. Estimation of Gross Profit (GP) on Suppressed Production: The Tribunal addressed the issue of quantifying the suppressed production and the application of a GP rate. The CIT(A) had estimated the GP at 4% on the suppressed production, which the Tribunal found reasonable. The Tribunal directed the Assessing Officer to verify the records and include the additional income in the hands of the assessee based on the GP rate or the actual GP rate declared by the assessee, whichever was higher. 6. Addition under Section 69C for Undisclosed Investment: The Tribunal upheld the addition under section 69C for undisclosed investment in respect of undisclosed turnover. The CIT(A) had estimated the undisclosed investment based on the average undisclosed turnover of half a week of the earliest year under appeal. The Tribunal found this estimation reasonable and upheld the addition of ?9,06,132. 7. Interest Liability under Section 234 ABC: The Tribunal noted that the issues regarding the charging of interest under sections 234A, 234B, and 234C were consequential in nature and dismissed these grounds of appeal raised by the assessee. Conclusion: The Tribunal partly allowed the appeals of both the assessee and the Revenue, directing the Assessing Officer to verify and include the additional income based on the clandestine removal of goods and the GP rate. The Tribunal upheld the rejection of the books of account and the addition under section 69C, while dismissing the objections regarding the validity of the reassessment proceedings and the necessity of a notice under section 143(2).
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