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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 ..... act that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him. Suppression of sales - Rejection of the books of accounts under the provisions of section 145(3) - HELD THAT:- The rejection of the books of accounts of the assessee has not been challenged either by the assessee or the revenue. Thus the order of the learned CIT-A qua to the rejection of the books has reached to its finality. It is the settled law that once the books of accounts have been rejected the only option available to the revenue is to estimate the profit on scientific basis. We find support and guidance from the judgment of PRESIDENT INDUSTRIES. [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] There was no allegation by the authorities below that the assessee has made some investment in the sales which has been suppressed. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. 1. The CIT(A) has erred in confirming addition u/s.68 of the Act of ₹ 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 ₹ 1,04,876/- is bad in Law and void and therefore entire Addition of ₹ 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. 1996-97. 3. With regard to addition u/s.68 it is submitted that the amounts so added in six different accounts consists of Opening Balance as well as Sale Proceeds which is not liable to be added u/s.68 of the Act as held by various Appellate Authorities and that the Assessing Officer worked out has not Peak Credit as per Law for making the Addition. B. 1. Your Appellant in respect of addition of ₹ 3,44,10,000/- as Alleged Suppressed Sales was wrongly made by the Assessing Officer and that since the Books of Accounts are Audited and subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of ₹ 3,07,56,000/- out of total addition of ₹ 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 @ ₹ 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(Appeals)-XIV, Ahmedabad may be set-a-side and that of the order of the Assessing Officer be restored. ITA No.995/Ahd/2014 AY 1995-96 2. At the outset, the learned AR for the assessee before us submitted that he has been instructed by the assessee not to press the ground No. 1 challenging the reopening of the assessment under section 147 of the Act. Accordingly we dismiss the same as not pressed. 3. The interconnected issue raised by the assessee in remai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 3,75,39,177/- being 33% of the total sales shown at ₹ 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 AO based on central excise report observed that the assessee has shown sales of its Polyester Texturized Yarn (for short PTY) product at a price of ₹ 49.50/- kg as against fair price of ₹ 68/ per kg only. The assessee during the year has sold 1859.96 tonnes of its PTY products. Accordingly the AO calculated suppressed sales of ₹ 3,44,10,000/- ( ₹ 68 49.50 * quantity 1860 tonnes) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 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 finding of the AO is not correct. As such there were no sales made by it to the 4 parties out of the total 10 parties. Similarly the assessee has made sales to the remaining 6 parties in the assessment year 1996-97. In fact, there was no sale made to the remaining 6 parties during the year under consideration. The assessee further submitted that the sales to 6 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 ₹ 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 credited from the parties (6 out of 10 parties as discussed above ) during the year under consideration stands at ₹ 3,76,44,053/- d. The information received from the central excise department was credible piece of evidence, suggesting that the assessee was engaged in diverting its sales to the local markets fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corresponding production and sale is not shown by appellant. On the basis of ₹ 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 ₹ 1.31 lac/ton this excess production / sale of 332 tonnes come to ₹ 4.35 crore (332 x 1.32). It is therefore the suppression of sale comes to ₹ 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 ₹ 23.43 cr. Reflected Net profit of ₹ 19.78 lac (0.84%) while during impunged previous year relevant to A.Y. 95-96 on the total turnover of ₹ 11.38 cr. The appellant shown net loss of ₹ 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 ₹ 23.43 cr. To ₹ 11.38 cr. Is stated to be mainly due to fall in production though as per capacity of production and total production, such reason is not correct. Now the A.O. made entire addition of suppression o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of profit embedded in the suppressed sale can only be brought to tax i.e. ₹ 36,54,000.00 only. Accordingly the learned CIT (A) deleted the addition for ₹ 3,07,56,000/-. Now the first issue before us arises whether the amount received by the assessee for ₹ 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 ₹ 4,11,36,522/- which are reproduced as under: (i) M.K. Textiles ₹ 29,04,991/- (ii) Hardik Textiles ₹ 1,98,91,748/- (iii) Lata Textiles ₹ 19,96,635/- (iv) Shaka Fabrics Nil (v) Ravi Textiles ₹ 1,17,87,669/- (vi) Piyush Textiles Nil (vii) Vijay Handloom ₹ 27,36,864/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresenting the cash credit as provided under section 68 of the Act. Then, the learned CIT (A) was duty-bound to reduce the same from the amount of sales as the same does not represent the sale but unexplained cash credit. As such, the same amount cannot be held taxable twice as per the wish of the learned CIT (A). In our considered view the action of the learned CIT (A) is erroneous to the extent of treating the same as sale proceeds and the unexplained cash credit simultaneously. 9.4. However, we are also conscious to the fact that there is no allegation from the authorities below that the impugned amount represents the unexplained cash credit over and above the sale proceeds. We also find important to refer the provisions of section 68 of the Act which reads as under: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that the learned CIT (A) has rejected the books of accounts under the provisions of section 145(3) of the Act. The rejection of the books of accounts of the assessee has not been challenged either by the assessee or the revenue. Thus the order of the learned CIT-A qua to the rejection of the books has reached to its finality. It is the settled law that once the books of accounts have been rejected the only option available to the revenue is to estimate the profit on scientific basis. In this regard we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of President Industries reported in 258 ITR 654 wherein it was held as under: The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s excisable goods, specified in Annexure I to this notification (hereinafter referred to as the said goods), when brought in connection with - (a) the manufacture and packaging of articles, or for production or packaging or job work for export of goods or services out of India into a hundred per cent export oriented undertaking (hereinafter referred to as user industry); ... ... ... from the whole of (i) the duty of excise leviable thereon under section of the Central Excise Act 1944, and (ii) the additional duty' of excise leviable thereon under sub-section (1) of section3 of the Additional Duties of Excise (Goods of Special Importance) Act 1957, subject to the following conditions, namely:- . 5. Notwithstanding anything contained in this notification, the exemption contained herein shall also apply to the said goods used for the purposes of production, manufacture, processing or packaging of articles in a user industry and such articles (including rejects, waste, scrap and remnants arising out of such production, manufacture, processing or packaging of articles) even if not exported out of India, are allowed to be cleared outside t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 or job work for export of goods or services out of India by hundred per cent Export Oriented Units approved by the Board of Approvals for hundred per cent Export Oriented Units, appointed by the notification of Government of India in the Ministry of Industry, Department of Industrial Policy and Promotion or the Development Commissioner concerned as the case may be, for this purpose, (hereinafter referred to as the said Board), from the whole of duty of customs leviable thereon under the First Schedule to the Customs Tariff Act 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act subject to (he following conditions, namely: -... (7) Notwithstanding anything contained in this notification the exemption herewith shall also apply to goods which on import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.1 In view of dae fact that in the aforesaid orders-in-original, the demand of appropriate duties of excise on final products, as indicated above, has already been confirmed, I hold that the noticee companies are eligible for the exemptions on the RM provided in the aforesaid notifications. If Ae demand 01 duties on RM were to be confirmed at this stage, it would amount to double taxation on RM as well as final products which is against the principles of taxation in Central Excise law since it is well settled that under Central Excise law, the levy of duty is on the goods per SE not ON the manufacturers of the goods. Furthermore, in view of the above facts, it is immaterial whether the goods suffer duty at the hands of supplier EOUs, SSTIL / BTL or user industries, GCUL / SRIL. 10.2 As regards the applicability of the condition allowed to be sold in India', it is seen that the final products cleared without payment of duty from the factory premises of SSTIL BTL said to be destined to reach the factory premises of GCUL / SRIL were in fact diverted sold in the local market viz., Domestic Tariff Area (DTA). Hence irrespective of whether the final products were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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