2022 (11) TMI 472 - AT - Income Tax

Suppression of sales - show cause notice issued by Excise Department against assessee alleging that assessee was engaged in undervaluation of sales - CIT-A deleted the addition - HELD THAT - As considered the judgment passed by the Co-ordinate Bench in case of Zirconia Cera Tech Glazes 2017 (11) TMI 1852 - ITAT AHMEDABAD wherein addition was made only on basis of and clandestine removal of goods and revenue had brought nothing on record that it had applied its mind over and above contents of said show cause notice and further, in excise proceedings, CESTAT had decided issue in favour of assessee, impugned addition was unjustified. We find that the order passed by the Ld. CIT(A) in deleting the addition holding reopening on the basis of the show cause issued by Excise Department not justified is just and proper so as to warrant interference. In that view of the matter, the Revenue s ground of the appeal is found to be devoid of any merit and thus dismissed. - Decided in favour of assessee.

Summary

Issues involved:
Deletion of addition on account of suppression of sales.

Analysis:
The judgment pertains to appeals filed by the Revenue against orders passed by the Ld. Commissioner of Income Tax (Appeals) for A.Ys. 2007-08 & 2008-09. The key issue in question is the deletion of an addition of Rs.1,33,61,517/- made on account of suppression of sales. The reassessment was initiated under Section 147 of the Income Tax Act based on information regarding evasion of Excise Duty by misdeclaration of maximum retail price of ceramics. The Income Tax Officer determined the concealed income, leading to the addition in question. However, the Ld. CIT(A) deleted this addition, citing that the reopening was solely based on a show cause notice issued by the Excise Authority, which was deemed unjustifiable according to a judgment by the Hon'ble Gujarat High Court in a similar case.

During the appeal hearing, the Ld. DR relied on the Assessing Officer's order, while the Ld. Counsel for the assessee referenced judgments by the Gujarat High Court and a Co-ordinate Bench. The Co-ordinate Bench's judgment emphasized that additions based solely on a show cause notice without further inquiry were unjustified, especially when the issue had been decided in favor of the assessee by the CESTAT in excise proceedings. The judgment by the Gujarat High Court highlighted the necessity of an independent opinion by the assessing officer, rather than merely relying on a show cause notice, to justify additions for tax purposes under the Value Added Tax Act.

Ultimately, the Tribunal found no reason to deviate from the Co-ordinate Bench's stance and upheld the Ld. CIT(A)'s decision to delete the addition. The Tribunal dismissed the Revenue's appeals for both A.Ys. 2007-08 and 2008-09, as the issue was identical in both cases. The judgment emphasized the importance of conducting thorough inquiries and forming independent opinions rather than relying solely on external notices or documents for making additions to taxable income.

This detailed analysis of the judgment showcases the legal intricacies involved in the deletion of the addition on account of suppression of sales and the significance of independent assessments in tax matters.