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TMI Blog2020 (3) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) has erred both in Law and in fact in holding that your Appellant is barred from challenging the Reopening of Assessment u/s.148/147 of the Act. It is submitted that in the present proceeding before the CIT(A) your Appellant had rightly and validity taken up the ground of Reopening of Assessment and that since the Reopening has been challenged which goes to the root of Assessment, the CIT(A) ought to have dealt with the ground and decided the question of Reopening on merits, keeping in mind the facts of the case and as per the provisions of Law. II. On Quantification: A. 1. The CIT(A) has erred in confirming addition u/s.68 of the Act of Rs. 3,75,39,177/-. It is further submitted that the CIT(A) has not given a specific Show Cause Notice to make enhancement and therefore the addition made by him of Rs. 1,04,876/- is bad in Law and void and therefore entire Addition of Rs. 3,76,44,053/- (3,75,39,177 + 1,04,876) be deleted. 2. Without prejudice, it is submitted by your Appellant that Sec.68 does not apply to the facts of the case and that the amount is not Deposit but Sale Realization and it does not pertain to the year under Appeal as it is related to A.Y. 1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- for the year but on facts of the case he should have adopted 3 years average and it being a Loss No addition could not have been made. It is therefore submitted tghat reliefs claimed above be allowed and the order of the Ld.CIT(A) be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal. The Revenue in ITA No.1166/Ahd/2014 for AY 1995-96 has raised the following grounds of appeal: 1) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 3,07,56,000/- out of total addition of Rs. 3,44,10,000/- made on account of difference in rate of sales of PTY holding that only profit element on suppressed sales was liable to be taxed & ignore the fact that the AO had made addition on account of profit element only @ Rs. 18,500/- per ton for 1860 tons of suppressed sales which has not been disputed by Assessee. 2) On the facts and in the circumstances of the case, the Ld.Commissioner of Income- Tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. 3) It is therefore, prayed that the order of the Ld.Commissioner of Income- Tax( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sold these finished goods fraudulently after involving other parties in the domestic market in order to avoid the central excise duty. 4.3. On the basis of such information the assessment was re-opened u/s 147 of the Act. The assessee during the assessment proceedings was requested to produce the books of accounts but it expresses its inability to do so as the books of account were seized by the Excise Department. 4.4. However, the AO during the assessment proceedings to verify the genuineness of the sales shown by the assessee in the books of accounts conducted inquiries on 10 parties to whom the assessee has shown sales. But as per the enquiry, these 10 parties did not exist. Therefore, the AO disbelieved the amount of sales shown by the assessee in the absence of books of accounts and non-existent of the parties. Accordingly, the AO treated the sum of Rs. 3,75,39,177/- being 33% of the total sales shown at Rs. 11,37,55,083/- as unexplained cash credit under section 68 of the Act. Thus the amount of unexplained cash credit was added to the total income of the assessee vide order dated 26th March 2002 under section 143(3) read with section 147 of the Act. 4.5. Further, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to produce the books of accounts as the same were seized by the Central Excise Department. The assessee further requested the AO to collect the necessary information/ books of accounts from the Central Excise Department. However, the AO in the absence of books of accounts again confirmed the addition of Rs. 7,46,23,277/- (Rs. 3,75,39,177/- under section 68 of the Act and Rs. 3,44,10,000/- suppression of sales) to the total income of the assessee. Aggrieved assessee preferred an appeal to the learned CIT (A). 5. The assessee before the learned CIT(A) submitted that it has written various letters to the central excise department requesting for the releasing of the books of accounts but its request remained unattended. Similarly, the assessee also requested the AO to collect the books of accounts directly from the excise department in order to verify the genuineness of the sales but the AO failed to do so despite there was the clear direction of Hon'ble ITAT to verify the books of account. 5.1. The assessee further submitted that the AO in his order dated 26th March 2003 has held that the sales shown by the assessee to the 10 parties were non-existent. As per the assessee the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment and passed the order in hurry/haste without the application of mind. The assessee further claimed the addition u/s 68 on account of unexplained cash credit was made arbitrarily. There was no clarity about the parties from the AO order in whose respect the addition is made. 5.8. The ld CIT(A) after going through submission and order of the Hon'ble ITAT and the order of the AO observed that it is the set-aside proceedings and the issue is confined to the direction of the ITAT. Accordingly, the learned CIT (A) made certain observations as detailed under: i. Regarding the addition of Rs. 3,75,39,171/- under section 68 of the Act a. The books of accounts of the assessee pertaining to the year under consideration were not seized by the central excise department. But the assessee on the pretext of getting the books of accounts seized by the central excise department did not produce the same during the proceedings for the reasons best known to it. b. There was proper enquiry conducted by the Joint CIT special range about the existence of the 10 parties as discussed above and it was submitted by him in his report that these parties do not exist. c. The amount credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of Rs. 6.27 cr. Was paid. But, as per Rs. 51,823/- per ton rate, such Central Excise duty comes to Rs. 4.55 cr. (878 x 51823). Therefore the appellant though recorded central excise payment in excess of Rs. 1.72 cr (6.27 - 4.55) but the corresponding production and sale is not shown by appellant. On the basis of Rs. 51,823/- per ton duty such excess production/sale worked out at 331.89 tones of PTY (1.72 cr./51823). (e) At the average rate of average sale price of Rs. 1.31 lac/ton this excess production / sale of 332 tonnes come to Rs. 4.35 crore (332 x 1.32). It is therefore the suppression of sale comes to Rs. 4.35 crore on the basis of estimation from the appellant's own records. It is important here to note that during previous year 93-94 relevant to A.Y. 94-95 the appellant on the total turnover of Rs. 23.43 cr. Reflected Net profit of Rs. 19.78 lac (0.84%) while during impunged previous year relevant to A.Y. 95-96 on the total turnover of Rs. 11.38 cr. The appellant shown net loss of Rs. 16.15 lacs. ((-) 1.41%) (As per working Results declared in director's report in fourteenth Annual Report). The reason for such decline in turn over from Rs. 23.43 cr. To Rs. 11.38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the total income of the assessee. However, the learned CIT (A) deleted the addition made by the AO in part by observing that the element of profit embedded in the suppressed sale can only be brought to tax i.e. Rs. 36,54,000.00 only. Accordingly the learned CIT (A) deleted the addition for Rs. 3,07,56,000/-. Now the first issue before us arises whether the amount received by the assessee for Rs. 3,76,44,053/- during the year represents the unexplained cash credit under section 68 of the Act. The assessee has claimed to have made sales to 6 parties amounting to Rs. 4,11,36,522/- which are reproduced as under: (i) M.K. Textiles Rs. 29,04,991/- (ii) Hardik Textiles Rs. 1,98,91,748/- (iii) Lata Textiles Rs. 19,96,635/- (iv) Shaka Fabrics Nil (v) Ravi Textiles Rs. 1,17,87,669/- (vi) Piyush Textiles Nil (vii) Vijay Handloom Rs. 27,36,864/- (viii) Sangitha Textiles Rs. 18,18,615/- (ix) Sarvan Textiles Nil (x) Royal Textiles Nil 9.2. The assessee against the impugned sales has received the amount from the parties in the year under consideration as detailed under: Sr.No. Name of party Amount of sale during previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10. 9.5 From the above, we note that the provisions of section 68 of the Act can be attracted where there is a credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing officer. The assessee has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income, answers by itself in the negative." 10.1. There was no allegation by the authorities below that the assessee has made some investment in the sales which has been suppressed. Therefore, the learned CIT (A), in our understanding, has correctly estimated the profit. Accordingly, we do not find any reason to interfere in the finding of the learned CIT-A. 10.2. We also note that the entire basis of the additions as discussed above was on the basis of the information received from the central excise department. We in this regard note that the proceedings of the central excise department has been dropped as evident from the order of The Commissioner of Central Excise (Adj.) Mumbai vide order dated 17.01.2007 bearing F. No. V/54/15-109/OA/2003, V/54/15- 124/OA/2003-04 and V/54/15-122/OA/2003-04. The relevant extract of the order is reproduced as under: "DISCUSSION & FINDINGS 8. I have carefully gone through the three show cause notices, the replies of the notices & the facts of the case. The main question before me for consideration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the said Board or the said Committee, as the case may be, on payment of appropriate duty of excise ... " (emphasis supplied) 9.2. Notification 13/81- Cus dt 9-2-81 states that: "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act 1962, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in the Table below (hereinafter referred to as the goods), when imported into India for the purpose of manufacture of articles for export out of India, or for being used in connection with the production or packaging of goods for export out of India by hundred per cent Export Oriented Undertakings approved by the Board of Approvals for hundred per cent Export Oriented Undertakings, appointed by the notification of Government of India in the former Ministry of Industry & Civil Supplies, (Department of Industrial Development) No. SO 163 (E) /RLIU/10 (2) /76 dt.3-3-1976, from the whole of duty of customs leviable thereon under the .... Schedule to the Customs Tariff Act 1975 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articles within hundred per cent Export Oriented Unit and such articles (including rejects, waste & scrap material arising in the course of manufacture of such articles) even if not exported out of India, are allowed to be sold in India, in accordance with the Export & Import Policy, on payment of duty of excise leviable thereon under section 3 of the Central Excise Act 1944....." (emphasis supplied) 10. On going through the provisions of the aforesaid exemption notifications, it is clear that RM was allowed to be procured duty-free by an EOU if the final products manufactured out of such RM was exported out of India. However, I also observe that the exemptions from the whole of the duties of excise/customs granted by the said notifications shall also apply if the final products manufactured out of such duty-free RM, even if not exported out of India, are allowed to be sold in India on payment of the appropriate duties of excise leviable thereon under section 3 of the Central Excise Act 1944. In this connection, I observe that the demand of duties on the final products, PTY drawn out of RM, POY, were confirmed vide the following orders-in-original: SCN issued to Suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise department as reproduced above. Thus in the absence of any assistance from the learned DR we have no alternate except to place the reliance in the aforesaid order as true and correct. Furthermore, we also assume that the impugned order of the central excise department pertains to the year under consideration. In the result the appeal filed by the assessee is allowed and the appeal filed by the revenue is dismissed. Coming to Assessee's CO No. 167/AHD/2014 for AY 1995-96 The Assessee in CO No.167/Ahd/2014 (in ITA No.1166/Ahd/2014 - AY 1995-96) for AY 1995-96 has raised the following grounds:- 1. The CIT(A) in his Speaking Order have rightly deleted addition of Rs. 3,07,56,000/- out of addition made to Rs. 3,44,10,000/- from alleged Suppressed Sales and have correctly arrived at profit thereon of Rs. 18,500/- following binding judgement of Hon.Gujarat High Court. In view of above the Departmental Appeal is infructuous and deserves to be dismissed. 12. At the outset we note that, the CO filed by the assessee is supporting the order of the learned CIT-A. As such there is no grievance raised by the assessee in the CO filed by it. Accordingly we hold that no separate adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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