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TMI Blog2010 (10) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to evasion of Excise Duty. This evidence showed that the assessee- company had suppressed the production and consequent sales of steel rods of bars and thus avoiding Excise Duty by under-invoicing sales. The assessee, in response to Central Excise proceedings approached to the Settlement Commission of the Excise Department and as per the order of the Commission dated 31.8.2006, the assessee agreed to pay additional excise duty, in addition to already paid for the goods manufactured and cleared as per books, to the tune of ₹ 6.27 crores for the period relevant to assessment years 2002-03 to 2004-05. On the basis of the findings of the Central Excise Department, the Assessing Officer worked out the suppression of sales after reopening the already completed assessment orders u/s 143(3) of the Act for assessment years 2002-03 to 2004-05 by issuance of notice u/s 148 on the basis of the fact finding made by the Central Excise Department. Consequently, the Assessing Officer worked out the suppression of sales at ₹ 1,06,82,296/-, ₹ 1,13,80,000/- and ₹ 1,35,40,000/- and added to the gross profit declared in the above assessment years respectively. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate the fact that the assessee company accepted before the Central Excise Settlement Commission that it resorted to unaccounted clearance of goods and under invoicing of goods and byproducts and evaded payment of excise duty. It accepted liability of additional excise duty (in addition 10 excise duty paid for goods manufactured and cleared as per books) to the tune of ₹ 6.27 crores as under: A.Y 2002-03 Rs.4,52,57,936/- for unaccounted production/under invoiced Sales/unaccounted sale of by-products A.Y 2003-04 ₹ 1,56,79,450/- -do- A.Y 2004-05 Rs.18,51,087/- -do- The excise duty is chargeable @ 16% of the assessable value. Consequently, the value of unaccounted goods cleared, the assessable value of goods cleared, gross profit on the assessable value of unaccounted goods cleared [calculated at the rate of 15% as worked out by CIT(Appeals)] are as under: Asst. Year in which Assessable Additional excise duty paid @ 16% of the assessable Value (1) Assessable Value of Unaccounted goods cleared (without C.E.Duty) (2) Value of unaccounted goods cleared (I + 2) (3) Gross profit @ 15% on unaccounted value of goods cleared (3) (4) 2002-03 4,52,57,93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is applicable to the present case and not that of Mohammed Dhurabudeen. 6. The ClT(Appeals) erred in deleting the additions made u/s 69 of the Act amounting to ₹ 57,98,507/-, ₹ 54,61,996/- and ₹ 14,20,000/- for the A.Ys. 2002-03, 2003-04 and 2004-05 respectively by holding that no unaccounted investment had been found. He failed to appreciate the undisputed admitted fact which emerged from the search made by Central Excise authorities that the assessee had made unaccounted production of steel rods and bars and for this unaccounted production made unaccounted purchases. It is these unaccounted purchases which ought to have been confirmed as unaccounted investment. The Assessing Officer treated 10% to 13% of the unaccounted turnover as unexplained investment. In Column 32(c) of the Form No.3CD filed with the return, assessee Company declared the ratio of Stock in trade to turnover as 12.51 %, 7.84%, and 7.69% for the A.Ys. 2002-03, 2003-04 and 2004-05 respectively. The CIT(Appeals) ought to confirm the additions for unaccounted investment at least to the extent of ratio of Stock in trade to turnover. 7. The CIT(A) erred in allowing the claim of Royalty payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment has arrived at 92% from scraps to billets and 95% from billets to rods and bars. Based on this estimation, the Excise Department has estimated the suppression of bars and rods and by- products. The Income-tax Department invited the attention of the assessee towards the findings given by the Central excise Department and sought explanation thereof. The assessee replied to the query raised by the Assessing Officer and the reply given in assessment year 2002-03, which is the base year, is as under: "The above assessment years for which notices and sec.147 have been issued, I wish to bring to your kind notice the following: Sri D.K.Audikesavulu took over the concern in 1991. As he was engaged in various business activities he could not devote full attention to this Company. With the result the Company was incurring losses year after year and became BIFR Company. With the view to come out of the BIFR besides increasing the Share capital of the Company he entrusted day to day working of the Company to Sri Srinivasulu Reddy and his associates with effect from 1999 for a period of 3 years and with understanding that the shares held in the company to be transferred to them after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accounted in Assessment year 2003-04. It has again stated that in the original computation it has disallowed 20% of the purchases for non existing aquaculture business and now everyone knows that no such business exists the disallowance made in the original computation needs to be reversed. It was again contended that there is no need for the company to conceal income as it is a BIFR company and have huge accumulated losses over the years and in fact more income has been shown than reality in order to come out of the status of a sick industry and there fore requested that case need to be seen sympathetically as there is no intention of evasion of tax for the reasons mentioned above." 5. It was further stated that with a view to bring the company out of BIFR, the assessee has been showing more income than what it really had and that all the sale proceeds of steel which were not invoiced or sold out of the books are brought in as either income from the aquaculture or in the form of sale of scrap. It was stated in the reconciliation of the unaccounted transactions that there was no expenditure incurred for earning aquacultures income as it was not existing and the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and mainly on the basis of consumption of Power and Furnace Oil and there fore the method adopted for estimation of sales is scientific and as per sales are concerned I believe that there is no an iota of doubt that sales determined by the Excise Department lack any practicality. Therefore I take the same sales for making this assessment. 9. I doubt the purchases and the assessee has made an unaccounted purchases of billets and made un accounted and fictitious sales of scrap etc. The quantity and value of purchases shown by the assessee are not correct and therefore, book result is not correct. Therefore the GP shown by the assessee is also is not genuine and difficult to believe that it is the real profit. 10. I reject both the unaccounted sales statement given by the assessee stating that the net concealment of income of ₹ 29,67,316/- and excess income of Rs.(-) 40,20,893/- as per the reconciliation to old statement. The ground for rejection is that no credible evidence exists for the claims." 6. Thereafter, he has categorically mentioned that the books of account are defective and therefore, the same were rejected. Under these circumstances, he has proceeded to es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it carries great weight. 7. We have gone through all these decisions which are clearly mentioned in ground No.2 of the appeals. All these decisions are distinguishable on facts as well as on law because all these decisions give a ratio that any 'settlement' made voluntarily by the assessee would form the basis of assessment. But all these decisions ostensibly were rendered in the context of income-tax proceedings and not in any other proceedings carried against the assessee and above all, all the decisions lay down unquestionable principle that such 'settlements' are rebuttable. The Assessing Officer has not considered the facts and the law in its correct perspective but has rather come to a conclusive finding on rebuttable evidence that the receipts shown from non- existing aqua business as far from controversy and it lacks creditble evidence and hence, he has rejected the books of account and proceeded to estimate the gross profit of the assessee on the disbelieved sales. He has arrived at additional gross profit for all these years as under: Assessment year Gross profit 2002-03 Rs.1,06,82,296 2003-04 Rs.1,13,80,000 2004-05 Rs.1,35,40,000 2005-06 NIL 8. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer has made the following additions u/s 40A(3) in these years which cannot be sustained in the eyes of law in view of the Hon'ble Jurisdictional High Court's decision cited supra: Assessment year 40A(3) 2002-03 Rs.1,15,97,014 2003-04 Rs.1,09,23,993 2004-05 Rs.2,76,574 10. Likewise, the unexplained investment added u/s 68 have been correctly deleted by the ld. CIT(A) because no investment has been found. All the addition in this account is based solely on pure guess work without any iota of evidence available on record. 11. The other common ground raised in these appeals is regarding payment of royalty for various years which are depicted in the following table: Assessment year Royalty paid 2002-03 Rs.3,51,104 2003-04 Rs.3,52,084 2004-05 Rs.2,72,196 2005-06 Rs.1,99,593 12. Similar royalty paid in earlier year has been accepted as a revenue expenditure by this Bench of the ITAT in assessee's own case for the earlier years. A copy of the Tribunal order dated 17.3.2006 for assessment years 1994-95 to 1999-2000 has been placed before us. By respectfully following the Tribunal order (supra), we confirm the order of the ld. CIT(A) on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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