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TMI Blog2012 (3) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... at the premises of the assessee and during that inspection, the concerned Revenue Department noticed that sales had been suppressed by the assessee ; being raw material purchased and finished goods sold in cash in the open market, are not accounted in the regular books of account of the assessee. For the year under consideration, the assessee filed its return declaring taxable income at Rs. 4,92,190 on September 17, 2008, which was processed under section 143(1) of the Income-tax Act, 1961 (in short "the Act") at the same income. The case of the assessee for the assessment year 2005-06 was made under section 143(3) read with section 148 of the Act, vide order dated December 31, 2009 and the additions exceeding Rs. 10 lakhs were made and hence the case of the assessee for the year under consideration was picked up for scrutiny by the Assessing Officer. The Assessing Officer made an addition of Rs. 91,89,357 on account of profit on the so-called unexplained sales was reflected in the books of account as per details given in paragraphs 4 to 12 of the assessment order. On appeal, the Commissioner of Income-tax (Appeals) deleted the addition for the reasons stated in paragraphs 7, 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the duty liability, that too on imaginary basis, especially when rules 173E mandatory requires the Commissioner to prescribe/ fix norm for electricity consumption first and notify the same to the manufactures and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. The Tribunal further observed that no experiments have been conducted in the factories of the appellants for devising the consumption norms of electricity norms of electricity for producing one MT of steel ingots. Tribunal also observed that the electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. Therefore, no universal and uniformly acceptable standard of electricity consumption can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. The Tribunal has also considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Appellate Tribunal "A" Bench, Chandigarh dated June 24, 2011 in the assessee's case in I. T. A. No. 319/Chd/2008 (ITO v. Arora Alloys Ltd. [2011] 12 ITR (Trib) 263 (Chandigarh)) relating to the assessment year 2004-05. The Tribunal decided similar issue, observing as under (page 275) : We have heard both parties and carefully considered their submissions (including the written submissions), materials placed by them on record and the authorities referred to by them. We have already reproduced the statement of Shri Harmesh Arora, director in the assessee-company as recorded by the Central excise authorities. In the aforesaid statement, it is admitted that the (i) capacity of the furnace was raised from 4 mts to 5 mts in December 2003 ; (ii) raw materials used to be procured in cash through brokers for generating unaccounted production ; and (iii) goods produced outside the books used to be sold in cash without issuing invoice or recording them and without paying excise duty thereon. Based solely on the aforesaid statement, the Central excise authorities concluded that the assessee had produced 624 mts of non-alloy steel ingots without accounting them in the record and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been made, the benefit should go to the appellants and accordingly, I hold that the appellants had been operating induction furnace with production capacity of 4 mts per heat only during the material period and there could be no question of clandestine manufacture and removal of steel ingots. I also agree with the appellants that at the material time, the excise duty was not leviable on the capacity of production but was leviable on the actual production and clearance of steel ingots. This fact also strengthens my earlier finding that the statement of Shri Harmesh Arora cannot be termed to be an independent and voluntarily one and cannot be made the basis for confirming the demand for duty. The appellants further submitted that neither any verification nor any investigation had been made from them as to from where they had acquired/purchased the raw materials for the manufacture of ingots allegedly cleared without payment of duty ; to whom they had sold the said ingots and to verity investigation from the consignorssuppliers as to whether they had supplied the raw materials to M/s. Arora Alloys Ltd., Ludhiana or from the users of such ingots as to whether they had received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter, also the fact that neither any statement from any purchaser of the alleged clandestinely removal steel ingots was recorded nor the statement of any seller of the raw material was brought on record nor the statement of any transporter was brought on record nor any recovery of sale proceeds of clandestinely removed steel ingots was made, coupled with the fact that neither the stock of finished goods was found in excess at the time of surprise visit by the central excise officers, the Department has not substantiated its case and it cannot be reasonably be said that the appellants have clandestinely manufactured and cleared steel ingots without payment of duty. As such, applying the ratio of the principle laid down by the Appellate Tribunal in the cases, supra, the confirmation of demand for duty and imposition of penalties on the company-appellant No.1 and its director (appellant No. 2) as detailed in the impugned order, cannot be sustained and are, therefore, set aside.' At the time of hearing before us, it was submitted by both parties that the order dated April 21, 2006 passed by the Commissioner (Appeals), Customs and Central Excise has not been accepted by the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as to whether a statement containing admission/confession is decisive in a given case depends upon the nature of admission, contents of admission, and several other relevant factors. Applying the aforesaid principles, we shall now examine as to whether the statement made by Shri Harmesh Arora before the Central excise authorities in the context of levy of excise duty on unaccounted production can form the sole basis for making the impugned additions by the Assessing Officer. The first and most important aspect is that the said statement was not recorded by the income-tax authorities but by the Central excise authorities. As held by the hon'ble High Court (reproduced supra), proceedings under the Central Excise Act have relevance only for formation of opinion of escapement of income and thereafter the income-tax authorities have to independently finalise the reassessment irrespective of the final view in excise proceedings. We find that the Assessing Officer has reassessed the income and made the impugned additions solely on the basis of the information received by him from the Central Excise Department without bringing any material on record to justify or support the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnace on August 21, 2002 at 08:00 hours. It is quite unlikely that an assessee would change the furnace almost in a year (i.e., in December 2003) from 4 ton to 5 ton. Besides, there is no evidence before us to show that the furnace of 4 ton, which was procured in 2002, was actually replaced by a furnace of 5 ton in December 2003. (ii) Each furnace has technical specifications which are available within the unit as also in the invoice. These specifications contain various details, e.g., the identity number of the furnace and its maker/ manufacturer, its capacity, wattage, etc. No detail has been placed before us to show that the technical specifications of the furnace found at the time of visit by the Central excise authorities on March 25, 2004 were different from the one procured by the assessee in 2002. Neither the Assessing Officer made the inquiry in this behalf at the assessment stage nor preferred to do so when he was given the opportunity by the Commissioner of Income-tax (Appeals) to do so. (iii) Report dated May 2, 2007 given by Er. J. S. Oberoi, chartered engineer/valuer, shows that he visited the factory of the assessee and found that the furnace of 4 ton, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) any of the parties from whom raw materials was purchased for generating unaccounted production ; (iii) any of the parties to whom unaccounted production was sold. In view of the foregoing, the statement of Shri Harmesh Arora cannot by itself form the basis for making the impugned additions. The Assessing Officer has given no other basis to support the additions made by him. In this view of the matter, the order passed by theCommissioner of Income-tax (Appeals) in this behalf is confirmed. Ground No. 2 is dismissed." The facts and circumstances of the present year are similar to that of the assessment order 2004-05. Respectfully following the order of the Tribunal (ITO v. Arora Alloys Ltd. [2011] 12 ITR (Trib) 263 (Chandigarh)) passed in the assessee's case for the assessment year 2004-05, we dismiss the ground No. 1 of the appeal. It is relevant to observe here that in the assessment year 2004-05, the Revenue agitated similar issue vide ground No. 2 of the appeal. The issue raised by the Revenue, vide Ground No. 2 of the appeal is also covered in favour of the assessee and against the Revenue by the decision of the Income-tax Appellate Tribunal "A" Bench, Chandigarh, order da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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