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TMI Blog2016 (2) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... reas appeal in ITA No. 27/Hyd/2013 is of the same assessee against the order of CIT(A)-I, dt. 25-10-2012 for AY. 2008-09. Thus, in all the above Revenue appeals, in the case of two assessees, the appeals vary from Assessment years 2000-01 to 2008-09. The only appeal of assessee in ITA No. 1555/Hyd/2011 is against the order of CIT(A)-I, Hyderabad, dt. 26-07-2011, confirming the addition made by the AO in AY. 2008-09 in the case of M/s. Balaji Steel Rolling Mills Pvt. Ltd. Since common issue is involved in all these appeals, we have considered them together and decided by this common order. 2. Briefly stated, assessees herein are in the business of re-rolling mills and manufacture of ingots. Search and seizure operations u/s. 132 of the Act were conducted on 09-08-2005 in the business premises of M/s. Balaji Steel Rolling Mills Pvt. Ltd as well as its sister concern M/s. Balaji Steel Rolling Industries and also residential premises of the Directors. Consequently, notices u/s. 153A dt. 06-02-2006 were issued calling for returns for Assessment years 2000-01 to 2005-06. The assessments from Assessment years 2001-02 to 2008-09 were completed at various periods but on similar lines. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel ingots outside the Books of Accounts and proceeds are introduced as advances in the Books of Accounts. Therefore, he undertook an exercise of analyzing the consumption of power recorded in units in the years 2000-01 to 2006-07. Based on the enquiries conducted with M/s. Sponge Iron India Ltd., and also on the expertise of a Technical Officer deputed by that company, the AO came to an opinion that average consumption for production of one ton of MS ingots is generally about 800 - 850 KWH. He also opined that as far as present operations are concerned, the consumption may be about 1100 - 1200 per KWH per ton of ingots considering assessee's business operations. On obtaining the information from Central Power Distribution Company Limited and taking the consumption in AY. 2000-01 as the basis (1260 KWH per ton of ingot), AO arrived at suppressed production of 2,028 tons out of 59,24,297 KWH units of power consumed. Assessee has shown production of 2,673 tons in the Books of Accounts, whereas AO arrived at possible production at 4,701 tons. After arriving at the possible production, AO gave credit for the raw-material that may be required to use including 10% burning loss and additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise and sales tax. The excise duty litigation of the appellant was not for the years under consideration is a point that has to be noted. In fact, as pointed by the appellant, if at all there was a litigation that was regarding rates of duty cum modvat availment cum short payment or excess payment of excise duty, but not regarding sales affected. It is also clarified that, that case was disposed by the Commissioner of Customs; Central Excise & Service tax (Appeals)-III, on 29th May 2006, allowing appellant's appeal in toto and therefore it would be noticed that there is no evidence of suppressed sale. I am also inclined to agree with the appellant that while estimating the income there was no base, more so found during the course of action under section 132(1), to treat the wastage at 20%. Thus, this estimation of wastage at 20% has to be treated as without a base or not as a consequence of a material found in search and as such is not sustainable. In addition, it may be noted here that the AO has not rejected the books of account. When the books were not rejected, there is no scope for any addition and the AO is bound to accept the book results. In view of the above and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessments have been completed u/s. 143(1) from Assessment years 2000-01 to 2004-05 and since no scrutiny was undertaken, these assessments could not get abated on the basis of the decision of the Special Bench of ITAT in the case of All Cargo Global Logistics Ltd., Vs. DCIT [137 ITD 287 (SB)] as confirmed by the Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd in ITA No. 523 of 2013 dt.21-04-2015, It is further submitted that even though Hon'ble jurisdictional High Court in the case of Gopal Lal Bhadruka Vs. DCIT [346 ITR 106] (AP) has upheld the additions, in spite of not having incriminating material Ld. Counsel submitted that the Co-ordinate Bench at Bombay in the case of ACIT Vs. Jayendra P. Jhaveri [65 SOT 118] (Mumbai) (URO) has held that where re-assessments made by the AO u/s. 153A without any incriminating material being found during search action, are not in accordance with law and consequently, returned/original assessments which acquired finality are to be reiterated. Apart from the legal principles, Ld. Counsel also referred to the orders passed by the Central Excise Authorities which are also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Excise Department have been more or less settled in favour of assessee and no adverse view can be taken on the basis of the show cause notices. It has no bearing on the sales figures of assessee, as there is no case of Central Excise for any suppressed production. Even though, Ld. DR relied on the Central Excise case press note before us, it is a case by the Central Excise Department for suppressed production on a meticulous enquiry by the officer which was upheld by the Tribunal. In this case, in spite of conducting search and seizure operations, no incriminating material was found. As seen from the order in ITA No. 1555/Hyd/2011 (which will be considered later in this order), Ld. CIT(A) while upholding the addition in that year, gave credit to the amount of advances forfeited and shown as 'income', which Revenue has accepted and has not contested. If the same stand is taken, assessee's income offered by way of forfeiture of advances is to the extent of Rs. 1,49,60,000/- whereas, the addition made was only Rs. 1,06,80,527/-. In view of that also, there is no scope for any addition being made in the present case. As rightly contended by the Ld. Counsel, Books of Accounts were no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , quantifying the sales after allowing certain expenses towards cost of raw materials, the appellant has submitted as under :- "While completing the assessment without any evidence on record, the Assessing Officer determined production on the basis of electricity consumption without appreciating the fact that the appellant's mill is a small unit and is labour oriented consisting of very old outdated machinery. Consumption of electricity depends on so many factors such as maintenance of electrical equipment, irregular supply of electricity, power shutdown, fluctuation in power and quality and quantity of raw material. The Assessing Officer compared the power consumption with reference to the Sponge Iron India Limited, a Public sector undertaking which is modernized and fully equipped automatic unit. The production of finished Goods depends on various factors such as quality and quantity of raw material and climatic conditions. The production of appellant's unit is subject to levy of excise duty and the officials of the Excise Department visit the factory premises every now and then and keep watch on removal of goods and payment of excise duty and they also come for audit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of his own observation which he has made in respect of amount forfeited and offered as income by the appellant" 5.2. I have considered the submissions made by the appellant, gone through the order of the Assessing Officer. It is a fact that the appellant is a small-scale unit existing for the last many years. The machinery was very old and power consumption is heavy. It is true that consumption of electricity depends on so many factors such as maintenance of electrical equipment, irregular supply of electricity, power shutdown, fluctuation in power and quality and quantity of raw material etc. It is also a fact that the AO' has compared the power consumption with reference to the Sponge Iron India Limited, a, Public sector undertaking that is modernized and fully equipped 1utomatic unit and thus comparison is ill founded, as it has given absurd results. Moreover; ,production of appellant's unit is .subject to check by excise and sales tax authorities. The officials' of those departments visit now and then keep a watch on production and, removal of finished products and conduct inspection whenever it is felt necessary. Finally, they make assessments, who have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place for such additions in search and seizure assessments. Accordingly, he deleted the additions made on this account in all the Asst. years 2001-02 to 2007-08. 06.2 In the order of CIT(A)-I, Hyderabad mentioned above, the CIT(A)-I, Hyderabad has observed that finding no justifiable basis for the addition on account of suppressed income and deleted the said addition, thereby decided the appeal in favour of the appellant. 06.3 On a consideration of the facts of the case for the asst. year 2000-01, it is seen that in the instant case, the estimation of suppressed income is based only on the working done by the Assessing Officer, after considering the power consumed for production, which led him to the conclusion that such power consumption must have been made for higher production, which was not disclosed by the appellant. However, even if the power consumption was on a higher side, it is seen that the Hon'ble Supreme Court in their judgement dated 31-1-2011, in the case of Commissioner of Central Excise, Meerut Vs. R.A. Casting (P) Ltd have opined that electricity consumption cannot be taken to be a reliable basis for estimating the production of a particular unit. Citing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 I have gone through the facts of the case and the submissions of the appellant. From the order of CIT(A), Guntur mentioned above it is seen that while deciding the issue, he had considered that the appellant is a small scale unit, existing for the last many years and that its machinery was very old, which could result in heavy power consumption. He had also appreciated that the consumption of electricity depends on so many factors, such as maintenance of electrical equipments, irregular power supply, power shut down, fluctuation in power and quality and quantity of raw material etc. He also took note of the fact that the appellant's power consumption was compared with a public sector undertaking, having modernized and fully equipped automatic unit. The CIT(A), Guntur therefore felt that the comparison itself was ill-founded and gave absurd results. As against this, he considered that the appellant's unit is subject to check by Excise and Sales Tax Authorities and that no discrepancies were found in production and sales upon their assessments. Therefore, he held that the additions made by the Assessing Officer were based on surmises and guess work and that there was no place for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has analyzed the pattern of power consumption in variouS assessment years and it was found that the power consumption was as low as 1260 units of power for manufacture of a tonne of ingot The AO has also referred to the opinion from Sponge Iron India Ltd wherein it was opined that in ideal condition the consumption of power should be 900 units per tonne of 'ingot. However, the AO had adopted a much higher figure while computing the suppressed production. In my view, the method adopted by the AO is quite reasonable and does not call for any interference insofar as unit consumption of electricity per one tonne of ingot is concerned. Insofar as the computation of suppressed production Is concerned, the AO has also relied on the income shown by the appellant in the form of advance forfeited. I find from the assessment order that the appella nt had been systematically showing other income in the form of advance forfeited from year to year. The table presented by the AO in page 4 and 5 of the assessment order indicates that the appellant has been showing huge cash received in the form of advance from buyers and later on crediting the same to the P&L Ale on the pretext of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in issue in those cases was whether the assessment u/s 153A can be completed without any incriminating material on hand. The assessment in the case under consideration was completed u/s 143(3) and not u/s 153A/153C. Further the Assessing officer has heavily relied on the fact that the appellant itself has introduced cash in its books in the form of advance forfeited which appellant also in a way agrees that it is sale receipts from sales not materialized. Thus the case laws relied on by the appellant is not squarely applicable in its case. Thus, considering the totality of fact I confirm the method of computation of income arising out of suppressed production at Rs. 2,16,l1,739/- as worked out by the AO . 05.0 The appellant contends that the expenditure incurred for suppressed production is on the low side and needs revision. No further explanation has been filed by the appellant as to how the expenditure allowed by the AO over and above the normal expenditure booked by the appellant in its books of etc is on the lower side. As discussed earlier, the AO has allowed 10% burning loss in addition to expenditure of 12 lakhs while working out the suppressed income. In view thereof, I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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