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TMI Blog2015 (8) TMI 1305X X X X Extracts X X X X X X X X Extracts X X X X ..... No.3 is challenged to reopening of assessment under section 147 of the Act. 2. In this case, the original return of income was filed on 28.11.2003 showing total income of ₹ 11,42,98,930/- which was assessed under section 143(3) of the Act on 31.1.2005 at an income of ₹ 21,54,65,790/-. On information received by the Assessing Officer from the office of Director General of Central Excise, Intelligence that the assessee had wrongly availed CENVAT credit for the period 21.10.2003 to 24.8.2005, the case was reopened under section 148 of the Act by issuing notice to the assessee on 30.3.2010. In response to the said notice, the assessee filed return of income on 29.7.2010 declaring the same income of ₹ 11,42,98,930/- as was declared in the original return. 3. The Assessing Officer during the course of assessment proceedings, issued show cause notice to the assessee alleging that it had availed fraudulent CENVAT credit for the period 21.3.2003 on 24.8.2005 on invoices issued by M/s Haryana Steel & Alloys Ltd. without receiving the consignments. As per the information, it was seen that the assessee had filed an application before the Settlement Commission, Customs & C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer came to the conclusion that the assessee had made purchases for the said material from other sources including open market purchases. He came to the conclusion that the assessee has claimed bogus CENVAT on the purchases shown to be made from M/s Haryana Steel & Alloys Ltd. amounting to ₹ 92,25,641/-. The CENVAT credit on said purchases from M/s Haryana Steel & Alloys Ltd. was amounting to ₹ 12,23,560/-. On these basis, the Assessing Officer made addition of ₹ 12,23,560/-. 6. Further the Assessing Officer held that the such bogus transactions being embedded in the trading/manufacturing account of M/s Shanti Steel New Rolling Mill-II Unit of the assessee, the correctness of the books of account of the assessee was distorted on these basis. He rejected the books of account of the said unit. Further, since the GP rate of the assessee had come down to 7.6% during the relevant assessment year as against 8.4% in the preceding assessment year, he applied the rate of G.P. shown in the preceding assessment year on the total turnover of ₹ 71,53,41,741/- and made an addition of ₹ 57,22,734/-. However, he did not made separate addition of ₹ 12,23,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see held that the assessee was consciously indulged in the fictitious arrangement for purchase from M/s Haryana Steel & Alloys Pvt. Ltd. The learned CIT (Appeals) was of the view that since the assessee has not been able to provide any evidence to the effect that similar quantity of material was purchased from the open market, the statement so made by the assessee carries no credence. Further the learned CIT (Appeals) held that nowhere the Assessing Officer has stated that similar quantity from the open market was purchased by the assessee. Relying on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. La Medica, 168 CTR 314, the learned CIT (Appeals) held that the payments to M/s Haryana Steel & Alloys Pvt. Ltd. were emanated from bogus purchases and fraudulent claim of CENVAT. In other words, unexplained expenditure expended towards the bogus purchases to the tune of ₹ 92,25,641/-. In this way, the learned CIT (Appeals) made an addition of ₹ 1,04,49,201/- comprising of ₹ 92,25,641/- being the total purchases from M/s Haryana Steel & Alloys Pvt. Ltd. and the amount of Rs,.12,23,560/- being the CENVAT credit availed by the assessee on the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasized that the department having taken a stand to add to the CENVAT Credit benefit availed by the assessee on bogus purchases in the subsequent years 2004-05 to 2006-07 cannot take the different stand of making addition of the whole amount of purchases in the current year. 15. The learned counsel for the assessee also took us to paper book page 43 whereby a chart showing the calculation of yield on monthly basis for rolling division was prepared. It was submitted that without taking into consideration the purchases made from the open market in the month of January and February, 2003, the yield comes to 101.87 % and 98.15%, which is unreasonably high and not possible in this line of manufacturing. It was shown to us to emphasize that the purchases were actually made though not from Haryana Steel & Alloys Pvt. Ltd. but from the other sources. 16. Regarding the estimation of G.P made by the AO, rejecting the books of account it was submitted that Gross Profit in the relevant year has fallen to 7.6 per cent as against 8.4 per cent in the preceding year, which is only a nominal fall. The assessee submitted before the Assessing officer as well as the CIT(A) that the reason of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sically, assessee could not have manufactured finished goods or indulged in selling the same. The yield per month would have been quite abnormal as compared to the other months if purchases made from open market are not considered. No other defects have been pointed out in the books of account. It is quite evident that the purchases have in fact being made, the source of these material physically, coming not from Haryana Steel & Alloys Pvt. Ltd. but from open market. The issue arose because of the fact that assessee receive excise duty element on sales from customers but paid the Government from that amount which remains payable after reducing the CENVAT credit available because of the fact that it made purchases from Haryana & Steel Alloys Pvt. Ltd. The whole excises carried on by the assessee was to get the benefit of these CENVAT Credit. Therefore, the only addition warranted in such case is to disallow the CENVAT Credit availed by the assessee on the purchases shown to have been made from Haryana & Steel Alloys Pvt. Ltd. The assessee has preferred not to pressed the ground related to these CANVAT Credit before the CIT(A), the same is also not contended before us. The fall in GP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of Vijay Protiens. 6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this Court in the case of Sanjay Oilcake Industries v. CIT, 316 ITR 274(Guj.) Such decision is also followed by this Court in a judgement dated 16.8.2011 in Tax Appeal No. 679 of 2010 in the case of CIT v. KishorAmrutlal Patel." In the result, tax appeal is dismissed." 20. Another point to be appreciated is that in subsequent years i.e., 2004-05 to 2006-07, the assessee was before the Income Tax settlement commission, whereby the same plea was taken by it. During the said proceedings on the perusal of report of the CIT(Central) Gurgaon, as submitted to the settlement commission, which we have already quoted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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