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TMI Blog2018 (8) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT” There is no material brought on record by the revenue to show that the agreement between the assessee and M/s. Tata Steel Limited for manufacture of high carbon ferro chrome is sham. - No disallowance can be made - Decided in favor of assessee. - ITA Nos.404 And 405/CTK/2017 - - - Dated:- 9-8-2018 - SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Assessee : Mss Swati Kejriwal, AR For The Revenue : Shri Saad Kidwai, CIT DR ORDER Per N.S.Saini, AM These are appeals filed by the revenue against separate orders of the CIT(A)-1, Bhubaneswar both dated 12.7.2017 for the assessment years 2012-13 2013-14, respectively. 2. In both the appeals, the common ground of appeal taken by the revenue is that the CIT(A) is not justified in deleting an addition of ₹ 4,06,06,511/- for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the slight difference in the chromium content would affect the quality of the end products produced by TSL on the basis of the finished goods supplied by the assessee. vii) The significance of the slight variation in the chromium content was not explained. viii) From the replies- furnished by the assessee it is to be inferred that the levels maintained by the assessee is normal based on the manufacturing process adopted by the assessee and the standards stipulated by TSL was not possible due to the technology being employed. ix) It was not established by the assessee, that whether it would be possible to maintain such a level of standard of output expect by TSL and that whether any other similarly placed manufacturer in maintaining the levels as stipulated by TSL. x) Being a group company, TSL is well aware of this and continued to provide contracts for the manufacture of the product to the assessee, which only confirms, that the difference in the chromium levels found in the finished products by the assessee had no real impact in the products produced by TSL. xi) Thus, it is inferred that the stipulation for maintenance of output level in the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee enclosed agreement entered into between Tata Steel Limited and Nava Bharat Ventures Limited, which was not a group company. The assessee also attached a detailed calculation wherein the recovery of Chrome Ore percentage wise and the recovery by Tata Steel Limited is laid out. Similarly, for the same financial year, the recovery of Chrome Ore percentage wise and recovery by Tata Steel Limited for M/s. Nava Bharat Ventures Limited is attached. It was pointed out that it can be seen from the two that this recovery is not happening from just the assessee but from every entity in the similar trade. The Assessing Officer has stated that it is ploy to reduce the profit margin of the assessee and, hence, the tax liability by Tata Steel Limited. It was very surprising to see that the Assessing Officer has stated things so callously without going into the facts of the case and without going into the Industry practices. Hence, it was submitted that the stand of the Assessing Officer that the assessee company being group company and, therefore, have entered into such agreements is not correct and bad in law. 7. It was submitted that the Chrome Content in the finished goods suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up company and in the agreement same terms conditions are there which exist in the agreement with the assessee company. Hence, it cannot be said that Tata Steel Limited and the assessee company has entered into an agreement deliberately so that the tax liability of the assessee company could be reduced because of deduction on account low chrome recovery. Moreover, the deduction made by Tata Steel Limited is real and the assessee company cannot be taxed on income not accrued or received. The Assessing Officer is justified to have a genuine doubt about the genuineness of the transactions of the assessee company with its sister concern Tata Steel Limited. However, on the basis of suspicion alone, no addition or disallowance can be made in the assessment. Therefore, he deleted the addition of ₹ 4,06,06,511/- for the assessment year 2012-13 and ₹ 3,46,16,358/- for the assessment year 2013-14 on account low chrome recovery. 9. Ld A.R. supported the order of the CIT(A) whereas ld D.R. supported the order of the Assessing Officer. 10. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT Further, the Hon ble Supreme Court in the case of Uma Charan Shaw Brors vs CIT, West Bengal reported in (1959) 37 ITR 271 (SC) has held that Taking into consideration the entire circumstances of the case, we are satisfied that there was no material on which the Income Tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. 14. Similarly, in the appeal before us, we find that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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