Appeal details
Counselvise Citation
14224914 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-05-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
17-03-2015
Assessment Year
2008-2009
Appeal Filed On
22-04-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI , ACCOUNTANT MEMBER . ITA. NO. 117 / RJT /20 1 3 (ASSESSMENT YEAR: 2008 - 09 ) VRUNDAVAN CERAMICS PVT. LTD. SURVEY N O. 143/2, 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT RESPONDENT & ITA. NO. 142 / RJT /20 1 3 (ASSESSMENT YEAR : 2008 - 09 ) ASSISTAN T COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT VS. VRUNDAVAN CERAMICS PVT. LTD. SURVEY NO. 143/2, 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT RESPONDENT PAN: AAEFM8240N & ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 2 ITA. NO. 113 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) VARMORA GRANITO PVT. LTD. 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT RESPONDENT & ITA. NO. 150 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT VS. VARMORA GRANITO PVT. LTD. 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT RES PONDENT PAN: AABCV7523M & ITA. NO. 109 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) GOKUL CERAMICS PVT. LTD. 8 - A, NATIONAL HIGHWAY, ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 3 VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL C IRCLE - 1, RAJKOT RESPONDENT & ITA. NO. 146 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT VS. GOKUL CERAMICS PVT. LTD. 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL . WANKANER, DIST. RAJKOT RESPONDENT PAN: AACCG0532E & ITA. NO. 1 05 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) GANGOTRI GLAZED TILES PVT. LTD. BHAGWATI CHAMBERS, 8 - A, NATIONAL HIGHWAY, MORBI , DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIO NER OF INCOME TAX, CENTRAL CIRCLE - 1, ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 4 RAJKOT RESPONDENT & ITA. NO. 1 38 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT VS. GANGOTRI GLAZED TILES PVT. LTD. BHAGWA TI CHAMBERS, 8 - A, NATIONAL HIGHWAY, MORBI, DIST. RAJKOT RESPONDENT PAN: AA CCG9019J & ITA. NO. 99 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) M/S. GANGA GLAZED TILES 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT RESPONDENT & ITA. NO. 132 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 5 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT VS. M/S. GANGA GLAZED TILES, 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT RESPONDENT PAN: AAEFM8240N & ITA. NO. 100 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) M/S. GANGA GLAZED TILES PVT. LTD. 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT RESPONDENT & ITA. NO. 133 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 6 VS. M/S. GANGA GLAZED TILES PVT. LTD., 8 - A, NATIONAL HIGHWAY, VILLAGE DHUVA, TAL. WANKANER, DIST. RAJKOT RESPONDENT PAN: AACCG9422H & ITA. NO. 125 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ITALICA FLOOR TILES PVT. LTD. SURVEY NO. 111/112, BANDHUNAGAR, AT MAKANSAR, 8 - A, NATIONAL HIGHWAY, TAL. MORBI, DIST. RAJKOT APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT RESPONDENT & ITA. NO. 169 / RJT /20 13 (ASSESSMENT YEAR: 2008 - 09 ) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, RAJKOT APPELLANT VS. ITALICA FLOOR TILES PVT. LTD. SURVEY NO. 111/112, BANDHUNAGAR, AT MAKANSAR, 8 - A, NATIONAL HIGHWAY, ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 7 TAL. MORBI, DIST. RAJKOT RESPONDENT PAN: AABCI2816C / BY ASSESSEE : SHRI S. N. SOPARKAR, ADVOCATE & SHRI HARISH RANPURA, C.A . / BY REVENUE : SHRI M. L. MEENA, CIT D.R. / DATE OF HEARING : 16 .0 3 .2015 / DATE O F PRONOUNCEMENT : 25 .0 5 .2015 ORDER PER BENCH : THESE SEVEN SETS OF CROSS APPEALS FILED BY SEVEN DIFFERENT ASSESSEES ARE ARISING OUT F R OM THE RESPECTIVE ORDER S OF CIT (A) - IV, AHMEDABAD . SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 117 / RJT /20 1 3 FOR A.Y. 2008 - 09 , ASSESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUND S : 1. 0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LEARNED CIT(A) ERRE D ON FACTS AS ALSO IN LAW IN CONFIRMING THE REJECTION OF BOOK RESULTS AND CONFIRMING THE ESTIMATED ADDITION ON ACCOUNT OF SUPPRESSED SALES AND PROFIT. 3.0 THE LEARNED CIT(A) ALSO ERRED ON FACTS AS ALSO IN LAW IN OBSERVING THAT PROFIT ELEMENT IN RESPECT OF SUPPRESSED SALES ESTIMATED BY AO @ 25% IS REASONABLE. THE ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 8 FINDING OF THE AO IS TOTALLY UNJUSTIFIED AND CONTRARY TO THE FACTS ON RECORD AND MAY KINDLY BE QUASHED. 3.1 THE LD. CIT(A) FURTHER ERRED IN ALLEGING THAT APPELLANT HAS SUPPRESSED MRP TO THE TUNE OF RS.17,56,54,060/ - ON WHICH IT COULD HAVE EARNED PROFIT @ 9% AND THEREBY RETAINING / CONFIRMING ADDITION OF RS.1,58,08,865/ - ON ACCOUNT OF ALLEGED SUPPRESSED PROFIT. THE ADDITION IS SUSTAINED IS TOTALLY UNJUSTIFIED ON FACTS AS ALSO IN LAW AND DESERVES T O BE DELETED, MAY KINDLY BE DELETED. 2. 1 IN ITA NO. 142 / RJT /20 13 FOR A.Y. 2008 - 09 , REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUND: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE PROFIT ON SUPPRESSED SALES @ 9% AS AGAINST @ 25% AS DETERMINED BY THE ASSESSING OFFICER AND THEREBY THE CIT(A) HAS RESTRICTED THE ADDITION TO RS.1,58,08,865/ - OUT OF TOTAL ADDITION OF RS.4,39,13,515/ - (9% OF SUPPRESSED SALES OF RS.17,56,54,060/ - I.E. RS.1,58,08,865/ - ). 3 . THE BRIEF FACTS OF THE CASE AS OBSERVED BY ASSESSING OFFICER ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUS I NESS OF MANUFACTURING OF CERAMIC TILES OF VARIOUS SIZES A N D MEASUREMENTS . THE ASSESSEE IS A PART OF THE ' VRUNDAVAN GROUP OF COMPANIES ' . THE C O MPANIES / UNITS CARRYING ON OPERATION U NDER THE BANNER OF THE SAME GROUP ARE (1) VRUND AV AN CERAMICS P. LTD . (2) GOKUL CERAM I C P . LTD . (3) GANGOTRI GLAZE TILES P . LTD. AND ( 4) G AN GA GLAZE TILES (NOW KNOWN AS GANGA GLAZE T IL ES P . LTD.) . 3.1 THE DIRECTORATE GENERAL OF CENTRAL EXC I SE I NTEL LI GENC E , AHMEDABAD (HEREINAFTER CALLED DGCEI ) UNIT CAME TO KNOW TH AT AN ESTIMATED NUMBER OF OVER TWO HUNDRED MAN U FACTURERS ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 9 OF T I LES , SITUATED I N DIFFERENT PARTS OF THE S T ATE OF GUJARAT , ARE EVADING DUTY OF EXCISE AND OTHER TAXES ON A MASSIVE SCALE . IT WAS FOUN D TO BE PRACTICALLY AN IMPOSSIBLE TASK TO SIMULTANEOUSLY SEARCH ALL THESE MANUFACTURERS AND THEIR 1000S OF DEALERS , DEPOTS , DISTRIBUTORS AND GODOWNS , S I TUATED ACROSS THE COU N TRY AS WE LL AS A LARGE NU MBER OF SHROFFS AND ANGADIAS , TRANSPORTERS , SHIPPING COMP ANIES ETC . THEREFORE , DG C EI SELECTED ELEVEN MANUFACTURERS OF TI L ES SITUATED IN MORB I INCLUD I NG THE UNITS OF APPELLANT GROUP AND SEVERAL TRANSPORTERS , SHROFFS , ANGAD I AS , SH I PPING COMPAN IE S AND DEA L ERS AND DEPOTS , S I TUATED AT DIFFERENT LOCAT I ONS AND CONDUCT ED A COORDINATED SEARCH OPERAT I ON ON 17.01.2008. INFORMATION REGARDING THE DETAILS OF CONS I GNMENTS SHIPPED IN COASTAL VESSELS WAS A L SO COLLECTED FROM THE CUSTOMS HOUSES AT KAND L A AND MUNDRA PORTS . S I MILARLY , STATEMENTS OF VARIOUS BANK ACCOUNTS HELD BY D I FFE RENT SHROFFS I N IC I CI BANK WERE ALSO COLL E CTED. THE FACTORY PREMISES OF THE UNITS OF APPELLANT GROUP WERE SEARCHED BY THE OFFICE R S OF THE D GCEI ON 17 . 01 . 2008 . DURING THE COURSE OF SEARCH , SEVERAL I NCR I M I NAT I NG DOCU M ENTS WERE RECOVERED . THE SEARCH OPERATION ON 17 . 01 . 2008 RESULTED IN RECOVERY OF A LARGE NUMBER OF INCRIMINATING DOCUMENTARY EVIDENCES . SEARCHES CONDUCTED AT THE PREM I SES OF DEALERS SITUATED IN VARIOUS PARTS OF THE COUNTRY , TRANSPORTERS AND SHROF FS ALSO RESULTED IN RECOVERY OF INCRIMINATING DOCUME NTARY EVIDENCES AGAINST THE APPELLANT GROUP . 3.2 BASED ON THE COMPREHENSIVE INVESTIGATION CARR I ED OUT BY ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 10 THE D GCEI AND THE ADVERSE INC R I M INAT I NG DOCUMENTARY EVIDENCES COLLECTED FROM THE PREM I SES OF THE APPELLANT GROUP, D EAL ERS, SHROFFS ETC . WERE M I NUTELY ANALYZED ESTAB LI SHING THE MODUS OPERANDI ADOPTED BY THE M AN UFACTURERS OF CERAMICS GLAZED AND VITRIFIED TILES OF MORBI AND OTHER PARTS OF THE STATE OF GUJ ARAT FOR THE PURPOSE OF LARGE SCALE OF EVAS I ON OF CENTRAL EXC I SE DUTY W I TH CONSEQUENT I AL EVASION OF CO MMERCIAL TAX, INCOME - TAX AND OTHER LOCAL TAXES SUCH AS OCTROI OR ENTRY TAX. THE MODUS OPERAN DI ADOPTED FOR EVASION OF TAXES WA S FOUND EVIDENT AS PER THE INCRIMINATING DOCUMENTS SEIZED AND THE STATEMENTS RECORDED OF ALL THE KEY PERSONS MANAGING THE AFFAIRS OF THE APPELLANT GROUP, DEALERS, SHROFFS ETC . DURING THE COURSE OF SEARCH PROCEEDINGS AND THEREAFTER BY THE DG C E I S UCH MODUS OPERANDI WA S BRIEFLY STATED AS UNDER: (I) THE MANUFACTURERS OF SUCH TILES ARE REMOVING FINISHED GOODS FROM THEIR REGISTERED FACTO RY PREMISES BY NOT DECLARING THE ACTUAL MAXIMUM RETAIL PRICE (HEREINAFTER CALLED MRP ) OF THEIR PRODUCTS I N THE CENTRAL EXCISE INVOICES . THEY WERE DECLARING ONLY A PART OF ACTUAL MRP AND CONSEQUENTLY EVADE PAYMENT OF DUTY OF EXC I SE BY DETERMINING A LOWER ASSESSABLE VALUE AFTER AVAIL I NG ABATEMENT OF 45% ON SUCH LOWER MRP. (II) THESE MANUFACTURERS ALSO MIS - DEC L ARE IN THE CENTRAL EXCISE INVOICES THE ACTUAL EX - FACTORY PRICES OF SUCH TILES , WHICH WA S RECOVERAB L E FROM THEIR BUYERS . THEY ARTIFICIALLY WORK OUT A N EX - FACTORY PRICE TO MATCH WITH THE LOWER MRP AND ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 11 MANIPULATED ASSESSABLE VALUE DECLARED IN THE AFORESAID MANNER . (III) THE MANUFACTURERS WERE ALSO MIS - DECLARING THE QUALITY AND GRADE OF TILES BY SUPPLYING SUPERIOR PREMIUM QUALITY TILES I N THE GRADE OF ART I FICIALLY MANAGED INFERIOR GRADE FOR SUPPRESSING THE ACTUAL SALE PRICE . (IV) THE DIFFERENTIAL VALUE, OVER AND ABOVE THE VALUE DECLARED IN THE CENTRAL EXCISE INVOICES , WAS COLLECTED BY THEM IN CASH FROM THE BUYERS AND SUCH CASH A MOUNTS WAS FOUND NOT ACCOUNTED FOR IN THEIR STATUTORY RECORDS . (V) THE RECIPIENT DEALERS OF SUCH TILES WERE ALSO SELLING THE SAME TO ULTIMATE C ONSUMERS BY NOT SHOWING THE ACTUAL MRP OR SALE VALUE IN THEIR SALE BILLS . THEY HAVE ARTIFICIALLY WORKED OUT THE SELLING PRICE TO MA TCH WITH THE LANDED COST DECLARED BY THEM ON RECORDS. DIFFERENTIAL VALUE , OVER AND ABOVE THE VALUE DECLARED IN THE SALE BILLS, WAS COLLECTED BY THEM FROM THE CONSUMERS IN C ASH. THUS, THE DEALERS ALSO EVADED VALUE - ADDED TAX (HEREINAFTER CALLED VAT ) ON THE TILES SOLD BY THEM. (VI) WHILE PART OF THE CASH AMOUNTS COLLECTED BY THE DEALERS AND DISTRIBUTORS IN THE AFORESAID MANNER WAS SPENT BY THEM TOWARDS MEETING THE UNDECLARED EXPENSES TOWARDS LOCAL T RANSPORTATION, TRANSIT INSURANCE, LOAD I NG AND UNLOADING EX PENSES ETC., THE REMAINING CASH AMOUNTS WHICH FORMED THE ACTUAL COST OF TILES, OVER AND ABOVE THE VALUE DECLARED IN ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 12 THE CENTRAL EXCISE INVOICES, WERE TRANSFERRED BY THEM TO THE MANUFACTURERS. (VII) IN ORDER TO TRANSFER SUCH CASH AMOUNTS FROM DEALERS TO M ANUFACTURERS, DIFFERENT METHODS WERE ADOPTED BY THEM. IN CASE OF TRANSFER FROM WITHIN THE STATE OF GUJARAT, CASH AMOUNTS WERE MOSTLY T RANSFERRED THROUGH ANGADIAS. IN CASE OF TRANSFER FROM THE VARIOUS LOCATION S OUTSIDE GUJARAT, CASH AMOUNTS WERE SOMETIMES C OLLECTED PERSONALLY BY THE AUTHORIZED REPRESENTATIVES OF THE MANUFACTURERS OR THEIR SALES PERSONNEL DURING THEIR VISIT TO THE DEALERS OR EVEN BY ANGADIAS. ( VIII) THE MOST COMMON METHOD USED FOR COLLECTION OF CASH AMOUNTS WAS THROUGH THE BANK ACCOUNTS OF ICICI BANK, HD FC BANK ETC. CONTROLLED BY THE SHROFFS, WHO OPENED BANK ACCOUNTS IN DIFFERENT PRIVATE BANKS, MOSTLY ICICI BANK, IN THE NAME OF A LARGE NUMBER OF FICTITIOUS TRADING FIRMS. THE SHROFFS WERE COMMUNICATING THE NAME OF SUCH TRADING FIRM, BANK ACCO UNT NUMBER, PAN NUMBER ETC. TO THE MANUFACTURERS. THE MANUFACTURERS WERE C OMMUNICATING THESE DETAILS TO THEIR DEALERS AND MARKETING PERSONNEL EITHER TELEPHONICALLY OR THROUGH SMS MESSAGES. THEY WERE ALSO MENTIONING A FAX NUMBER IN SUCH COMMUNICATIONS. ACCO RDINGLY, THE DEALERS WERE DEPOSITING CASH AMOUNTS INTO THESE ACCOUNTS AT MULTI - LOCATIONS AND WERE SENDING A COPY OF THE RELEVANT PAY - IN - SLIP BY FAX TO THE NUMBER COMMUNICATED BY THE MANUFACTURERS. THE ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 13 MANUFACTURERS, ON THE BASIS OF FAX COPIES OF SUCH PAY - IN - SLIPS RECEIVED FROM THE DEALERS, WERE COMMUNICATING THE DETAILS OF SUCH CASH DEPOSITS TO THE SHROFFS. THEREAFTER, SHROFFS WERE WITHDRAWING THE CASH AMOUNTS FROM THE RESPECTIVE BANK ACCOUNT AND WAS EITHER HANDING OVER THE SAME TO THE MANUFACTURERS OR THE IR DEDICATED REPRESENTATIVES. IN ORDER TO EVADE CASH TRANSACTION TAX OR TO AVOID DETECTION BY THE AUTHORITIES, THESE SHROFFS WERE SOMETIMES TRANSFERRING SUCH CASH AMOUNTS TO SOME OTHER BANK ACCOUNTS , MOSTLY HELD IN DIFFERENT CO - OPERATIVE BANKS IN RAJKOT, B EFORE WITHDRAWING THE CASH AMOUNTS IN THE AFORESAID MANNER. 3.3 AFTER MAKING DETAILED INVESTIGATION WITH REFERENCE TO THE MODUS OPERANDI ADOPTED BY THE TIL ES MANUFACTURERS AND AFTER RECORDING THE DETAILED STATEMENTS OF ALL THE KEY PERSON S, A DETAILED SHOW CAUSE NOTICE WAS ISSUED TO THE APPELLANT BY THE D GCEI RELATING TO EVASION OF EXCISE DUTY OF RS.3,87,52,927/ - FOR THE FINANCIAL YEARS FROM 2003 - 04 TO 2007 - 08. THE SHOW CAU SE NOTICE ISSUED BY DGCEI WA S LIKE A COMPENDIUM OF ADVERSE DOCUMENTARY EVIDENCES COLL ECTED FROM THE PREMISES OF THE APPELLANT GROUP, DEALERS, SHROFFS ETC. AS WELL AS STATEMENTS RECORDED OF ALL THE KEY PERSONS WITH REFERENCE TO THE SEIZED INCRIMINATING MATERIAL WITH DUE ANALYSIS AND FINDINGS OF EVASION OF TAXES ON A MASSIVE SCALE BY ADOPTIN G THE ABOVE MODUS OPERANDI . THE SHOW CAUSE NOTICE ALSO CONTAINS A NUMBER OF ANNEXURES WHICH SUMMARIZES ALL THE FINANCIAL ACTIVITIES OF THE MANUFACTURERS INCLUDING THE APPELLANT GROUP R EGARDING ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 14 SUPPRESSED SALES RESULTING INTO EVASION OF TAXES . ON A MASSIVE SCALE. FOR THE PURPOSE OF COMPUTING THE EXTENT OF EVASION OF EXCISE DUTY , DIFFERENCE IN ASSESSABLE VALUE THAT SHOULD HAVE BEEN ADOPTED FOR THE PURPOSE OF THE CENTRAL EXCISE DUTY AFTER ALLOWING ABATEMENT @ 45% HAS BEEN DETERMINED ON THE BASIS OF ACTUA L MRP OR SALE PRIC E OF TILES. TH E DIFFERENCE BETWEEN THE ABOVE ASSESSABLE VALUE AND THE ASSESSABLE VALUE THAT HAS BEEN SUBJECTED TO PAYMENT OF CENTRAL EXCISE DUTY AFTER ALLOWING ABATEMENT @ 45% ON THE BASIS OF MRP ADOPTED AS PER RECORDS AND DISCLOSED BY T HE APPE LLANT FOR ACTUAL PAYMENT OF CENTRAL EXCISE DETERMINES THE ASSESSABLE VALUE FOR THE PURPOSE OF CALCULATING DIFFERENTIAL EXCISE DU TY AT THE PRESCRIBED RATES WHICH HAS BEEN EVADED . 3.4 T HI S WAY ON ACCOUNT OF DETAILED AND CO MPREHENSIVE INVESTIGATION, D GCEI O BSERVED THAT THE MANUFACTURERS IN CONNIVANCE WITH THEIR DEALERS SITUATED ACROSS THE COUNTRY WERE SELLING TILES WITHOUT PROPER SALE BILLS AND COLLECTING HUGE AMOUNTS, OVER AND ABOVE THE DECLARED BILL VALUE , WHICH HAD BECOME A MARKET PRACTICE ACROSS THE COUN TRY AND IT WAS RUNNING AS A PARALLEL ECONOMY TO THE LARGER RUIN OF NATIONAL EXCHEQUER . THE TOTAL AMOUNT OF CASH THAT HAS BEEN SENT BY THE DEALERS TO THE SHROFFS AT RAJKOT IN RESPECT OF SALE OF THE TILES OVER AND ABOVE THE DECLARED MRP WAS FOUND MORE THAN R S .1820 CRORES FOR ALL THE RELEVANT YEARS . THE SAME HAS BEEN TABULATED BASED ON THE EVIDENCE COLLECTED AS PER ANNEXURE N - 5 TO THE SHOW CAUSE NOTICE WHICH IS THE CHART SHOWING AMOUNTS DEPOSITED IN CASH BY THE DEALERS OF CERAMIC TILES MANUFACTURERS IN 63 ACC OUNTS OPERATED ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 15 BY SHROFFS. THE ABOVE AMOUNT OF CASH TRANSACTIONS WOULD BE ACTUALLY MUCH HIGHER SINCE OTHER EXPENSES HAVE ALSO BEEN MET OUT OF CASH COLLECTED BY THE DEALERS OVER AND ABOVE THE DISCLOSED SALE PRICE B EFORE SENDING THE SAME TO THE SHROFFS, TO B E DELIVERED TO THE MANUFACTURERS AS WELL AS THE FACT THAT THE CASH FROM THE DEALERS OF GUJARAT WAS COLLECTED MOSTLY THROUGH ANGADIA OR IN PERSON THROUGH THE REPRESENTATIVE OF APPELLANT GROUP OR WAS PAID BY THE DEALERS DURING THEIR VISIT TO MORBI. 3.5 ASSE SSING OFFICER IN INCOME TAX PROCEEDINGS , ON THE BASIS OF THE INCRIMINATING EVIDENCES COLLECTED BY THE DGCEI AND THE STATEMENTS RECORDED OF ALL THE KEY PERSON S AS CONTAINED IN THE SHOW CAUSE NOTICE ISSUED BY THE DGCEI, HAS DETERMINED THE SUPPRESSED SALES BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION AT RS.17,56,54,060/ - WHICH IS THE DIFFERENCE IN ASSESSABLE VALUE FOR THE PURPOSE OF CALCULATING DIFFERENTIAL EXCISE DUTY. AFTER DISCUSSING THE ADVERSE EVIDENCES COLLECTED BY THE DGCEI AND AFTER GIVING OPP ORTUNITY TO THE APPELLANT, ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT U/S 145(3) OF THE ACT BY HOLDING THAT IT IS CRYSTAL CLEAR THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT GIVING THE REAL PICTURE OF ITS STATE OF AFFAIRS, M ORE SO, WHEN THE ASSESSEE HAD ADMITTED THAT IT HAD RECEIVED AND EXPENDED, OVER AND ABOVE WHAT HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS. 3.6 THEREAFTER, ASSESSING OFFICER HAS ESTIMATED THE PROFIT ELEMENT IN RESPECT OF SUCH SUPPRESSED SALES BY ADOPTING THE RATE OF 25% AND CONSEQUENTLY MAKING AN ADDITION OF RS.4,39,13,515/ - ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 16 BEING PROFIT ON SUPPRESSED SALE BY RELYING ON THE DECISIONS OF VIJAY PROTEINS LTD. VS. ACIT 58 ITD 428 OF ITAT, AHMEDABAD BENCH AND SA N JAY OIL CAKE INDUSTRIES VS. CIT 316 ITR 274 (GUJ) . 3.7 ASSESSING OFFICER ALSO OBSERVED THAT CIT(A) IN THE CASE OF M/S VRUNDAVAN CERAMICS P. LTD. AS WELL AS M/S GOKUL CERAMICS P. LTD. FOR AY 2007 - 08 HAS VIDE ORDER NO.CIT(A) - IV/331 - R/CC - 1/09 - 10 DTD. 15 - 02 - 2011 AND ORDER NO CIT(A) - IV/330 - R/CC - 1/09 - 10 DTD. 15 - 02 - 2011 RESPECTIVELY HAS UPHELD THE ACTION OF ASSESSING OFFICER SO FAR AS REJECTION OF BOOKS OF ACCOUNT U/S 145 OF THE ACT AS WELL AS THE QUANTUM OF SUPPRESSED SALES IS CONCERNED. HOWEVER, SO FAR AS ESTIMATION OF PROFITS ON SUPPRESSED SALES IS CONCERNE D, THE CIT(A) HAS DETERMINED THE SAME AT THE NET PROFIT RATE OF 13.2% / 10.68% ON THE SUPPRESSED SALES WHICH WAS ACTUALLY THE NET PROFIT RATE BEFORE DEPRECIATION IN THE CASE OF M/S VRUNDAVAN CERAMICS P. LTD. AND M/S GOKUL CERAMICS . LTD. RESPECTIVELY IN RES PECT OF ITS RECORDED SALES. 4. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) VIDE ITS ORDER DATED 6 TH FEBRUARY, 2013 HELD AS UNDER: 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND HAVE GONE THROUGH THE VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. 9.1 THE CENTRAL EXCISE DUTY IS L EVIABLE AT THE PRESCRIBED RATE ON THE VALUE WHICH IS DETERMINED A FTER ALLOWING AN ABATEMENT OF 45% OF THE MRP WHICH IS AFFIXED ON THE ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 17 PACKAGES OF TILES. THE EXCISE DUTY IS LEVIED WITH REFERENCE TO DECLARED MRP AFTER ALLOWING AN ABATEMENT @ 45% IRRESPECTIVE OF THE FACT OF ACTUAL SALE PRICE. FOR EXAMPLE, IF THE DECLARED MRP ON A BOX OF TILES OF PARTICULAR GRADE / SIZE / QUALITY IS R S .100 / - - , THE CENTRAL EXCISE DUTY IS LEVIED AT THE PRESCRIBED RATE ON R S .55/ - (AFTER ALLOWING ABATEMENT @ 45%) IRRESPECTIVE OF T HE FACT AS TO WHERE THE BOX OF TILES HAS ACTUALLY BEEN SOLD AT R S .75/ - OR R S .55/ - OR R S .1 00 / - OR RS.40 / - . 9.2 SO FAR AS THE DETERMINATION OF QUANTUM OF SUPPRESSED SALES ON WHICH THERE IS EVASION OF INCOME - TAX IS CONCERNED, IT IS NECESSARY TO FIND OUT TH E BASIS OF EVASION OF EXCISE DUTY AS DETERMINED BY THE D GCE I . FOR EXAMPLE, THE DECLARED MRP ON A BOX OF TILES IS RS. 100/ - . THEREFORE, THE EXCISE DUTY IS TO BE LEVIED ON RS.55/ - AT THE PRESCRIBED RATE. H OWEVER, IT IS NOTED THAT THE SAID BOX HAS BEEN ACTUA LLY SOLD AT RS.200/ - . THEREFORE, THE ACTUAL MRP HAS TO BE TAKEN AT RS.200/ - WITH REFERENCE TO WHICH EXCISE DUTY SHOULD HAVE B EEN PAID. THE EXCISE DUT Y IS ACTUALLY LEVIABLE ON RS.11 0/ - AFTER ALLOWING AN ABATEMENT @ 45% I.E. RS.90/ - . THUS, THE EVASION OF EXC ISE DUTY IS ON THE DIFFERENCE IN THE ASSESSABLE VALUE I.E. RS.55/ - I.E. (RS.110/ - - RS.55/ - ). THUS ON SUCH RS.55/ - WHICH IS THE DIFFERENCE BETWEEN ASSESSABLE VALUE AS PER ACTUAL MRP AND THE DECLARED MRP AFTER ALLOWING AN ABATEMENT @ 45%, THERE IS EVASION O F EXCISE DUTY. THE ABOVE HYPOTHETICAL EXAMPLE IS GIVEN IN A TABULAR FORM FOR BETTER APPRECIATION AS UNDER: NO. OF BOX OF TILES MRP DECLARED (RS.) THE ASSESSABLE VALUE SUBJECT TO EXCISE DUTY AFTER ABATEMENT @ 45% (RS.) ACTUAL MRP (RS.) ASSESSABLE VALUE FO R THE PURPOSE OF CENTRAL EXCISE DUTY AFTER ALLOWING ABATEMENT @ 45% (RS.) DIFFERENCE IN ASSESSABLE VALUE ON WHICH THERE IS EVASION OF EXCISE DUTY (RS.) (RS.110 - RS.55) 1 100/ - 55/ - 200/ - 110/ - 55/ - IN THE PRESENT CASE, BY TAKING INTO ACCOUNT THE SIZE/ QU ALITY / NO. OF BOXES MANUFACTURED AND CLEARED FOR PAYMENT OF ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 18 DUTY AND ON THE BASIS OF ACTUAL MRP I.E. THE PRICE AT WHICH THE TILES HAVE BEEN ACTUALLY SOLD DETERMINED ON THE BASIS OF INCRIMINATING DOCUMENTS AS CONTAINED IN THE SHOW CAUSE NOTICE, THE DIFFERE NCE IN THE ASSESSABLE VAL UE ON WHICH THERE IS EVASION OF DUTY HAS BEEN DETERMINED. 9.3 IN VIEW OF THE ABOVE, ONCE THERE IS EVASION OF EXCISE DUTY, IT INVARIABLY SIGNIFIES THE SUPPRESSION OF SALES ON WHICH THERE IS EVASION OF INCOME - TAX SINCE THE ACTUAL SA LE PRICE IN RESPECT OF BOXES OF TILES IS MORE THAN THE RECORDED SALE PRICE IN THE BOOKS OF ACCOUNTS. SUCH SUPPRESSION OF SALES IS ACTUALLY THE DIFFERENCE BETWEEN THE ACTUAL SALE PRICE AND THE SALE PRICE AS RECORDED IN THE BOOKS. THE AO HAS DETERMINED THE Q UANTUM OF SUPPRESSED SALES AS THE AMOUNT OF DIFFERENCE IN ASSESSABLE RATE ON WHICH THERE IS EVASION OF EXCISE DUTY. IN THE CASE OF ABOVE EXAMPLE, SUPPRESSED SALE IS THUS DETERMINED AT RS.55/ - ONLY. HOWEVER, IT MAY BE SEEN THAT IF THE RECORDED SALES IS AT R S.100/ - (I.E. THE DECLARED MRP) AND ACTUAL SALE IS MA D E A T RS.200/ - AS PER ACTUAL MRP, THE SUPPRESSION OF SALES WOULD BE RS.100/ - . HOWEVER, TH E SALE INVARIABLY TAKES PLACE AT A FIGURE LOWER THAN THE DECLARED MRP, IN THAT SITUATION, THE Q U AN T U M OF SUPPRESSE D SALES WOULD BE MORE THAN RS.100/ - . THUS, IF THE RECORDED SALES IN RESPECT OF THE BOX OF TILES IS AT AN AMOUNT LESS THAN RS.100/ - AS PER DECLARED MRP AS AGAINS T TH E AC T UAL SALE PRICE OF RS.200/ - , THE SUPPRESSED SALES WOULD BE MORE THAN RS.100/ - . THIS W AY, I T MAY BE SEEN THAT THE QUANTUM OF SUPPRESSED SALES FOR THE PURPOSE OF INCOME - TAX W ILL ALWAYS BE HIGHER THAN THE DIFFERENCE IN ASSESSABLE VALUE ON WHICH THERE IS EVASION OF EXCISE DUTY. THE QUANTUM OF SUPPRESSED SALES IS STILL HIGHER BECAUSE OF THE FACT THAT THERE IS ALSO MI S - DECLARATION REGARDING DESIGN / COLOUR / QUALITY OF TILES IN ORDER TO HIDE ACTUAL VARIETY OF TILES SO AS TO DECLARE LOWER MRP IN THE BOOKS. THUS, THE SUPERIOR QUALITY OF TILES IS SOLD AT A HIGHER PRICE IN THE GARB OF DECLARED INFERIOR QUALITY. HOWEVER, IN CASES OF SALE S THROUGH DEALERS, THE FREIGHT / PROFIT MARGIN OF THE DEALERS ARE TAKEN INTO ACCOUNT WITH REFERENCE TO THE ACTUAL MRP WHICH WILL REDUCE THE QUANTUM OF SUPPRESSED SALES TO THAT EXTENT THEREFORE, IN CASE OF SALES THROUGH DE ALERS, THE DIFFERENCE BETWEEN THE NET SALE PRICE TO THE ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 19 DEALERS AND THE SALE PRICE RECORDED IN THE BOOKS OF ACCOUNTS IS THE QUANTUM OF SUPPRESSED SALES. HOWEVER, SINCE THE QUANTUM OF SUPPRESSED SALES IS TAKEN AS THE DIFFERENCE BETWEEN THE ASSESSABLE VALUE AS PER ACTUAL MRP (IS RS.200 / - PER BOX) AFTER ALLOWING ABATEMENT @ 45% AND DECLARED MRP (IS R S .100 / - PER BOX) AFTER ALLOWING ABATEMENT OF @ 45%, AS DISCUSSED ABOVE, SUCH ESTIMATION OF SUPPRESSED SALES APPEARS TO BE FAIR AND REASONABLE. IN THE CASE OF ABOVE EXAMPLE, SINCE THE QUANTUM OF SUPPRESSED SALES IS TAKEN A T R S .55/ - ONLY WHICH SIGNIFIES THAT ACTUAL SALE PRICE RECORDED IN BOOKS IS RS. 55/ - AS AGAINST DECLARED MRP OF R S .100 / - AND WHICH HAS BEEN SOLD AT R S .200 / - (ACTUAL MRP) BY THE DEALERS TO THE ULTIMAT E BUYERS OUT OF WHICH RS.110 / - HAS SENT TO THE MANUFACTURERS. OUT OF SUCH NET SALE PRICE OF RS.110 / - , R S .55/ - HAS BEEN RECEIVED BY WAY OF CHEQUE OR REMAINING RS.55/ - HAS BEEN RECEIVED BY WAY OF CASH OVER AND ABOVE THE RECORDED SALE PRICE. THUS, THE SUPPRES SED SALES IN THE CASE OF THE APPELLANT WILL BE THE DIFFERENCE BETWEEN THE ACTUAL NET SALE PRICE TO ITS DEALERS WHICH IS TAKEN AT RS.11 0 / - AS AGAINST ACTUAL MRP OF R S .200 / - AND THE RECORDED SALE PRICE IN THE BOOKS OF ACCOUNTS AT R S .55/ - AS AGAINST THE DECL ARED MRP OF R S .100 / - THE QUANTUM OF ABATEMENT @ 45% TAKES CARE OF THE FREIGHT / PROFIT MARGIN ETC. ATTRIBUTABLE TO THE DEALERS. 9.4 THE CONTENTION OF THE APPELLANT THAT THERE IS NO SUPPRESSION OF SALES IS DEVOID OF ANY MERIT OR LOGIC IN VIEW OF THE FACT THAT HUGE AMOUNT OF CASH ARISING ON ACCOUNT OF SALE OF TILES AT A PRICE WHICH IS MUCH MORE THAN THE DOCUMENTED PRICE HAS BEEN SENT TO THE APPELLANT GROUP THROUGH SHROFFS BY THE DEALERS WHICH IS EVIDENT AS PER THE INCRIMINATING DOCUMENTARY EVIDENCES AVAILAB LE ON RECORD. THE UNACCOUNTED CASH TRANSACTIONS WHICH EXCEEDS MORE THAN 1820 CRORES IN RESPECT OF TILES MANUFACTURER INCLUDING THE APPELLANT GROUP IS AN ESTABLISHED FACT AS PER THE DETAILS OF ACCOUNTS MAINTAINED BY THE SHROFFS FOR THE ABOVE PURPOSE WHICH A RE PART OF ASSESSMENT RECORDS. THE APPELLANT WAS SUPPRESSING THE SALES BY SHO WI NG LESSER MRP IN THE SALES INVOICES THAN THE ACTUAL MRP. THE DIFFERENTIAL VALUE WAS COLLECTED IN CASH FROM THE BUYERS AND SUCH CASH AMOUNTS ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 20 WERE NOT ACCOUNTED FOR IN THEIR STATU TORY RECORDS. THE RECIPIENT DEALERS AND DISTRIBUTORS WERE ALSO NOT SHOWING ON RECORDS, THE ACTUAL EXPENSES INCURRED BY THEM TOWARDS LOCAL TRANSPORTATION, TRANSIT INSURANCE, LOADING AND UNLOADING EXPENSES ETC. THESE EXPENSES WERE ALSO METED OUT BY THEM IN C ASH FROM THE SUPPRESSED SALES. THUS, THIS IS A SIMPLE AND OBVIOUS CASE OF SUPPRESSION OF SALES. THE CASH RECEIPTS, AFTER SETTING OFF CERTAIN UNACCOUNTED EXPENSES, WERE BEING POCKETED BY THE APPELLANT COMPANY FROM THE SUPPRESSED SALES. THUS, THE APPELLANT C OMPANY WAS ENGAGED IN SUPPRESSING THE ACTUAL BUSINESS INCOME BY SUPPRESSING THE SALES. BY WAY OF ILLUSTRATION AS PER INCRIMINATING DOCUMENTS, IT IS REPORTED BY THE D GCEI AS UNDER: '7.10.1.4. IT IS THUS EVIDENT THAT AS PER THE CENTRAL EXCISE INVOICES, VR UNDAVAN GROUP OF UNITS WERE DECLARING MRP OF R S .120/ - FOR THE TILES OF ALL THE DESIGNS OF SIZE 8'X8' BUT VRUNDAVAN GROUP OF UNITS WERE SELLING THE SAME AT THE RATES OF RS. 115 / - , RS. 125/ - AND RS. 150/ - PER BOX TO THEIR DEALERS WHO IN TURN WERE SELL ING AT THE RATES RANGING FROM RS .175 / - TO RS .240/ - PER BOX. THUS ON THE INVOICES, MRPS RANGING FROM 50% TO 68.57% OF THE ACTUAL MRP WERE DECLARED BY THE VRUNDAVAN GROUP OF UNITS. 7.10.1.6. IT IS THUS EVIDENT THAT THOUGH VRUNDAVAN GROUP OF UNITS ARE DECLARING MRP OF ONLY R S .120/ - PER BOX FOR THE TILES OF ALL VARIEITIES OF SIZE 12'X12' OF STD GRADE, THEY ARE CHARGING AMOUNTS RANGING FROM RS. 100/ - TO R S .165/ - FROM THEIR DEALERS WHO ARE SELLING THE SAME AT THE RATES RANGING FROM R S .160/ - TO R S .265 / - PER BOX. THUS ON THE CENTRAL EXCISE INVOICES, VRUNDAVAN GROUP OF UNITS ARE DECLARING MRPS OF 45.28% TO 75% ONLY OF THE ACTUAL MRP. 14.7.3. SEVERAL PAGES OF SAID FILE N O.A/ 52 CONTAIN DE TAILS OF RETAIL SALES BY M/ S CABLE. AS AN EXAMPLE, PAGE NO. 128 SHOWS RETAIL SALES. 4 BOXES OF 12'X 12' FLOOR TILES HAVE BEEN SOLD FOR R S .760/ - @ R S .190/ - PER BOX. ON THE BASIS OF SAID PAGE, THE RATES OF 12'X12' SIZE TILES WORK OUT TO R S .190/ - , R S .200/ - , RS. 185 / - ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 21 AND RS. 180/ - PER BOX. THUS THE SAID DOCUMENTS ALSO REVEAL THAT M/S CABLE WERE SELLING T HE TILES AT THE RATES MUCH HIGHER THAN THE MRP DECLARED BY T HE MANUFACTURERS OF TILES. ' 9.5 THE QUANTUM OF SUCH SUPPRESSED SALES DETERMINED ON THE ABOVE BASIS HAS BEEN CONFIRMED BY THE HON'BLE ITAT IN ITS ORDER IN THE CASE OF M / S V RUNDAVAN CERAMICS P. LTD. AND M/ S GOKUL CERAMICS P. LTD. FOR AY 2007 - 08 AS MENTIONED ABOVE. 9.6 I DO NOT AGREE WITH THE CONTENTION OF THE APPELLANT THAT MERE INFORMATION RECEIVED FROM D GCEI AND SHOW CAUSE NOTICE ISSUED BY IT DOES NOT CONSTITUTE VALID REASONS FOR DISTURBING BOOK RESULTS OF THE APPELLANT IN ABSENCE OF ANYTHING TO SHOW THAT THE AO HAS INDEPENDENTLY APPLIED HIS MIND TO ARRIVE AT A CONCLUSION THAT THE APPELLANT SUPPRESSED SALES. IN FACT THE AO HAS INDEPENDENTLY APPLIED HIS MIND TO THE INCRIMINATING DOC UMENTS BROUGHT ON RECORD BY OGCEI AS PART OF THE SHOW CAUSE NOTICE AND DETERMINED THE QUANTUM OF SUPPRESSED SALES WHICH IS DULY CONFIRMED BY ITAT. IT IS AN OBVIOUS FACT THAT ONCE THERE IS UNDER INVOICING FOR EVASION OF EXCISE DUTY, THE SUPPRESSION OF SALE S IS AN OBVIOUS OUTCOME ACCOUNTING FOR EVASION OF INCOME - TAX AS WELL. BASED ON THE EVIDENCES COLLECTED BY EXCISE/ CUSTOMS / POLICE AUTHORITY, ADDITION OF UNACCOUNTED INCOME MADE BY THE INCOME TAX AUTHORITIES HAS BEEN UPHELD IN A NUMBER OF JUDICIAL DECISIONS. A FEW SUCH DECISIONS RELIED UPON IN THIS REGARD ARE AS UNDER: - (I) CIT VS. C. LAJPATRAI LTD. [2008] 296 ITR 629 (GUJ) (II) MANHARLAL C. SONI VS. CIT [1995] 215 ITR 634 (GUJ) (III) CHUHARMA L VS. C IT [1988] 172 I TR 250 (SC) MOREOV ER, IT IS ALSO AN ADMITTED PRINCIPLE IN LAW THAT ADVERSE EVIDENCES COLLECTED EVEN DURING AN ILLEGAL SEARCH / SURVEY CAN ALWAYS BE USED AGAINST THE ASSESSEE FOR TAXING THE ESCAPED UNACCOUNTED INCOME. 9.7 THE CONTENTION OF THE APPELLANT THAT THE BOOKS OF A CCOUNTS ARE AUDITED U/S 44AB OF THE ACT AND THE AUDITORS ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 22 DID NOT POINT OUT ANY DISCREPANCY IS DEVOID OF ANY MERIT IN VIEW OF THE FACT THAT THERE IS AN ADMITTED SUPPRESSION OF TURNOVER / SALES AS PER THE MODUS OPERANDI ADOPTED BY THE APPELLANT GROUP AND ACT UAL SALE PRICE IS ADMITTEDLY MUCH MORE THAN WHAT IS RECORDED IN THE BOOKS OF ACCOUNTS. OBVIOUSLY, THE FACT OF SUPPRESSION OF SALES AND RELATED DOCUMENTS WERE NOT BEFORE THE AUDITORS. HOWEVER, IT DOES NOT DILUTE THE FACT THAT THERE IS A WID ESPREAD EVASION O F EXCISE DUTY / INCOME - TAX ON ACCOUNT OF SUPPRESSION OF TURNOVER BY COLLECTING CASH FOR THE DEALERS / BUYERS OVER AND ABOVE THE PRICE AT WHICH SALE IS RECORDED IN THE BOOKS OF ACCOUNTS AS IS EVIDENT FROM THE PLETHORA OF INCRIMINATING EVIDENCES COLLECTED / SEIZED FROM THE PREMISES OF THE ALL THE KEY PLAYERS, APPELLANT, DEALERS, SHROFFS ETC. WHICH HAVE BEEN DULY ADMITTED BY THEM IN THEIR STATEMENTS. THUS, THERE IS NOT AN IOTA OF DOUBT THAT THERE IS SUPPRESSION OF SALES AND, THEREFORE, IT IS OBVIOUS THAT THE B OOK RESULTS OF THE APPELLANT ARE NOT RELIABLE SINCE THE SAME DO NOT DEPICT THE TRUE PICTURE OF ITS STATE OF AFFAIRS. IN VIEW OF THE ABOVE, THE REJECTION OF BOOKS OF ACCOUNTS BY THE AO U/S 145 OF THE A CT IS PERFECTLY JUSTIFIED WHICH HAS ALSO BEEN UPHELD BY THE HON'BLE ITAT IN ITS ORDER IN THE CASE OF M/S VRUNDAVAN CERAMICS P. LTD. AND M/S GOKUL CERAMICS P. LTD. FOR AY 2007 - 08. 9.8 SO FAR AS THE ESTIMATION OF PROFITS ON SUPPRESSED SALES IS CONCERNED, IT IS POINTED OUT THAT THERE HAS BEEN EXPENDITURE ON ACCO UNT OF TRANSPORTATION EXPENSES, PURCHASE OF RAW MATERIAL ETC. WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. THERE IS NO QUANTIFICATION DONE IN RESPECT OF SUCH UNRECORDED EXPENDITURE MADE BY WAY OF CASH. THE APPELLANT HAS ALSO NOT SUBMITTED THE DETAI LS / EXTENT / QUANTUM OF SUCH UNRECORDED EXPENDITURE EITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS. THEREFORE, ESTIMATION OF PROFITS ON SUPPRESSED SALES IS THE ONLY AVAILABLE OPTION SINCE THE ENTIRE SUPPRESSED SALES CANNOT BE TAXED. ONLY THE PROFIT ELEMENT ON SUCH SUPPRESSED SALES CAN BE BROUGHT TO TAX. I ALSO AGREE WITH THE APPELLANT THAT THE ESTIMATION SHOULD BE MADE ON THE BASIS OF AVAILABLE MATERIAL AND CIRCUMSTANCES OF THE CASE IN ORDER TO MAKE A FAIR AND HONEST ESTIMATE O F THE EVADED ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 23 INCOME 9.9 THE AO HAS ESTIMATED THE PROFIT, ON SUPPRESSED SALES @ 25% BY RELYING ON THE DECISIONS IN THE CASE OF VIJAY PROTEINS LTD. AND SANJAY OIL CAKE INDUSTRIES. HOWEVER, THE FACTS OF THE ABOVE CASES ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. IN THE ABOVE CASES, THE ISSUE INVOLVED IS OF BOGUS / UNVERIFIABLE PURCHASES WHEREAS IN THE PRESENT CASE T HERE IS SUPPRESSION OF SALES. 9.10 THE CIT (A) IN HIS ORDE R IN THE CASE OF M/ S V RUNDAVAN CERAMICS P. LTD. AND M/ S GOKUL CERAMICS P. LTD. FOR AY 2007 - 08 HAS ESTIMATED SUCH PROFI TS ON SUPPRESSED SALES @ 13.2% / 10.68% RESPECTIVELY WHICH IS NET PROFIT BEFORE DEPRECIATION OF THE APPELLANT ON ITS RECORDED SALES. THE CIT (A) HAS ALSO CONSIDERED THE INSTANCES OF COMPARABLE CASES OF RAMCO C ERAMICS LTD AND FERRO GLAZED TILES PVT. LTD. BROUGHT ON RECORD BY THE APPELLANT FOR THE PURPOSE OF ARRIVING AT THE ABOVE ESTIMATION. THE GROSS PROFIT / NET PROFIT IN THE ABOVE COMPARABLE CASES IS LESS THAN THAT OF THE APPELLANT. IT IS, HOWEVER, HELD BY THE CIT(A) THAT SINCE THE NET PROFIT BEFORE AND AFTER DEPRECIATION OF THE APPELLANT COMPANY WAS FAR BETTER THAN THE OTHER TWO COMPARABLE CASES, THE NET PROFIT OF THE APPELLANT COMPANY ON SUPPRESSED SALES CANNOT BE ESTIMATED ON THE BASIS OF NET PROFIT DECLARED BY THE ABOVE COMPARABLE COMPANIES. THUS, THE INSTANCES OF COMPARABLE CASES, EVEN THOUGH CONSIDERED BY THE CIT (A), HAVE BEEN REJECTED. IT IS, HOWEVER, OBSERVED BY THE CIT (A) THAT SINCE THE APPELLANT WAS SHOWING HIGHER GROSS PROFIT AS COMPARED TO THE COMP ARABLE CASES, IT IS LIKELY THAT CERTAIN PORTION OF PROFIT FROM SUPPRESSED SALES HAD BEEN DECLARED IN THE AUDITED ACCOUNTS BY SHOWING LESSER COST OF PRODUCTION. SUCH OBSERVATION OF THE CIT(A), WHICH IS NOT A FINDING, IS BASED ON THE COMPARISON OF GP RATIO O F COMPARABLE CASES WHICH IS LOWER THAN THE APPELLANT GROUP. 9.11 IN MY CONSIDERED VIEW, THERE IS NO BASIS OR EVIDENCE TO HOLD SUCH A VIEW THAT GROSS PROFIT SHOWN BY THE APPELLANT INCLUDES THE PORTION OF PROFIT IN RESPECT OF SUPPRESSED SALES. SINCE THE GRO SS PROFIT OF THE COMPARABLE CASES IS HIGHER THAN THAT OF M/ S V RUNDAVAN CERAMICS P. LTD. AND M/ S GOKUL ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 24 CERAMICS P. LTD., IT CANNOT BE SO CONCLUDED PARTICULARLY BECAUSE THE BOOK RESULTS OF THE COMPARABLE CASES ARE NEITHER SACROSANCT NOR THE INDUSTRY BENCH M ARK. JUST BECAUSE THERE HAS BEEN NO SEARCH BY THE DGCEI IN THE ABOVE C OMPARABLE CASES AND THE BOOK RESULTS HAVE BEEN ACCEPTED BY THE AO IN THESE CASES, DOES NOT MAKE THEM BENCHMARK FOR THE PURPOSES OF ESTIMATION OF PROFIT PARTICULARLY IN VIEW OF THE FACT T HAT ALL THE TILES MANUFACTURERS HAVE BEEN EVADING CENTRAL EXCISE / INCOME TAX ON ACCOUNT OF SUPPRESSION OF TURNOVER AS IS EVIDENT FROM LARGE AMOUNT OF CASH TRANSFER TO SHROFFS ON ACCOUNT OF UNRECORDED SALES OF TILES. IN FACT, THE DECLARED GP / NP IN THE C ASE OF THE APPELLANT IS ACTUALLY SUPPRESSED MAINLY BECAUSE OF THE FACT THAT A LARGE PORTION OF EXPENDITURE PERTAINING TO SUPPRESSED SALES IS ALREADY DEBITED IN THE BOOKS OF ACCOUNT. THE VALI D COMPARISON, THEREFORE, COULD HAVE BEEN MADE AMONGST THE CONCERNS WHICH HAVE BEEN SUBJECTED TO INVESTIGATION BY THE D GCE I . MOREOVER, THE CIT (A) IN HIS FINDING HAS NOT ACCEP T ED HE BOOK RESULTS OF THE COMPARABLE CASES. FURTHER, THE FACTS OF THE CASE OF AERO CLUB (2011) 336 ITR 400 (DELHI), ARE ENTIRELY D IFFERENT. IN THAT CASE, THERE IS NO SUPPRESSED SALES. THERE IS NO ADVERSE EVIDENCE IN THAT CASE JUSTIFYING THE REJECTION OF BOOK RESULTS. THEREFORE, I T IS HELD BY THE COURT THAT - ' THE PROFIT MARG I NS OF A TA X PAYER AS DECLARED BY HIM CAN BE VARIED AND DISTURBED ONLY I F T H E PROFIT MARGINS IN THE CAS E OF OTHER ASSESSEES ENG A GED IN SIMILAR BUSINESS ARE HIGHER . IN TH E INSTANT CASE , THE ASSESSEE HAD BROUGHT ON RECORD EV I DENCE THAT IN THE CASE OF A COMPAN Y HAVING SIMILAR BUSINESS , THE DECLARED PROFITS WERE , IN FACT , LOWER THAN T HE PROFITS DECLARED BY THE ASSESSEE . THE ASSESSING OFFICER , IN HIS REMAND REPORT, WAS ALSO UNABLE TO COMMENT ON THE COMPARABLE CASES RELIED UPON BY THE ASSESSEE . IN THE C I RCUMSTANCES , THE TRIBUNAL RIGHTLY HELD THAT THE NET PROFIT AS DECLARED BY THE ASSESS EE WAS NOT REQUIRED TO BE D I STURBED . ' 9.12 SINCE THERE IS NO HARD AND FAST RULE AVA I LABLE FOR ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 25 DETERM I NATION OF PROF I T O N SUPPRESSED SALES , IT WOULD BE FAIR TO EXAMINE THE E XPENSES C L AIMED IN THE BOOKS OF ACCO U N T S OF THE APPELLANT FOR THE PURPOSES OF EST I MAT I ON OF PROF I TS ON SUPPRESSED SALES . IF WE ANA L YZE THE EXPENSES CLA I MED IN THE BOOKS OF ACCOUNT AS RECORDED , IT IS NOTED THAT MAJOR EXPEND I TURE IS ON ACCOUNT OF POWER & FUEL WHICH IS MORE THAN 45% OF THE TOTAL EXPENSES CLAIMED IN THE BOOKS . IN THE PRESEN T CASE , OUT OF TOTAL EXPENDITURE AS RECORDED IN THE BOOKS AT R S . 32 , 82 , 41 , 933/ - , THE EXPENDITURE ON POWER AND FUEL I S RS . 15 , 20 , 16 , 336/ - . THE OTHER MANUFACTUR I NG EXPENSES IS RS . 14 , 92 , 576 / - . IT IS AN ADM I TTED FACT THAT THERE IS NO QUANT I TA TI VE D I FFERENCE IN T ERMS OF PRODUCT I ON OF TI L ES BY THE APPEL L ANT . TH I S I S A CASE OF UNDER INVO I C I NG / SUPPRESS I ON OF SALES IN VALUE TERMS ONLY. IN V I EW OF TH I S , THE EXPEND I TURE ON POWER / FUEL AND OTHER MANUFACTURING EXPENSE CANNOT BE MAN I PULATED AS THERE CANNOT BE ANY EXTRA EXPENDITURE ON THIS ACCOUNT WITH REFERENCE TO THE SUPPRESSED SALES . THERE IS , HOWEVER , POSSIBILITY FOR UNRECORDED EXPENDITURE I N RESPECT OF . TRANSPORTA TI ON COST , CASH PORT I ON I N PURCHASE OF RAW MATE RI A L W IT H NO D I FFERENCE I N QUANT I TY , AND OTHER ADM I N I STRA T I VE EXPE N SES EVEN THOUGH NO QUAN TI F I CA TI ON HAS BEEN DONE BY T HE APP ELL ANT I N T HI S REGARD . MO R EOVER , T HE CLA I M OF DEPREC I AT I ON OF RS . 1 , 85 , 45 , 409/ - AS CLA I MED I N THE P&L A/C I S ALSO NOT SUBJECT TO ANY MANIPULAT I ON . THUS , THE MAJOR EXPEND I TURE AS RECORDED I N THE BOOKS IS NOT S UBJECT TO ANY MANIPULATION SINCE THERE IS NO QUANTITATIVE DIFFERENCE I N THE PRODUCTION OF FINISHED GOODS . THE ABOVE CAN BE TABULATED AS UNDER : SR. NO . PARTICULARS (RS.) AMOUNT (RS.) 1 . NET SALES AS RECORDED 33,73,62,870/ - IN BOOKS 2 . EXPENSES CLAIMED 15,20,16,636/ - ( I ) POWER & FUEL (II) OTHER MANUFACTURING EXPENSES 14,92,576/ - ( III ) DEPRECIATION 1,85,45,409/ - ( IV ) REMAINING EXPENSES ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 26 CLAIMED (INCLUDING C OST OF RAW MATERIAL) 15,61,87,612/ - _______________ TOTAL EXPENSES 32,82,41,933/ - RATIO OF REMAINING EXPENSES TO NET SALES 46% THUS, AMOUNT OF TOTAL EXPENSES OF RS.32,82,4 1,933/ - CLAIMED, A MAJOR PORTION OF THE EXPENDITURE OF RS.17,20,54,321/ - WHICH INCLUDES EXPENSE ON POWER AND FUEL AND MANUFACTURING EXPENSES AS WELL AS DEPRECIATION, IS NOT SUBJECT TO ANY MANIPULATION IN THE SENSE THAT THERE CANNOT BE ANY UNRECORDED EXPEND ITURE I N RESPECT OF THE ABOVE WITH REFERENCE TO THE S UPPRESSED SALES . THUS , IN RESPECT OF MORE THAN 50% OF EXPENSES, THERE IS NO SCOPE OF ANY VARIAT I ON . ONLY IN RESPECT OF REMAIN I NG EXPENSES, THERE IS POSSIBI L ITY OF UNRECORDED EXPENDITURE RELATING TO SUPP RESSED SALES . THE AMOUNT OF REMAINING EXPENDITURE I S RS . 15,61,87 , 612/ - AS AGAINST THE RECORDED NET SALES OF RS . 33 , 73,62,8701 - . THE RATIO OF SUCH REMAINING EXPENDITURE TO THE RECORDED NET SALES WILL BE 46% . THEREFORE, IF UNRECORDED EXPENDITURE WITH REFERENC E TO SUPPRESSED SALES OF R S . 17 , 56 , 54 , 0601 - IS ALSO ALLOWED @ 46% AS IN THE CASE OF RECORDED SALES , THE PROFITS ON SUPPRESSED SALES WILL BE 54% OF THE SUPPRESSED SALES AS AGAINST 25% ESTIMATED BY THE AO . CONSIDERING THE ABOVE, ALLOWANCE OF 75% IN RESPECT OF SUPPRESSED SALES AS UNRECORDED EXPENDITURE AS HAS BEEN DONE BY THE AO IS MORE THAN REASONABLE EVEN THOUGH THE AO HAS NOT EXAMINED THE ISSUE WITH THE ABOVE PERSPECTIVE FOR MAKING ESTIMATION OF PROFITS WITH REFERENCE TO SUPPRESSED SALES. 9 . 13 SO FAR AS TH E RELIANCE OF THE AO ON THE NEW COMPARABLE C ASES OF M/ S D ECOLIGHT CERAMICS LTD . AND M / S ANTIQUE GRANITE P . LTD . IN WHICH THE REPORTED NP RATIO IS SHOWN AT R S . 17 . 74% AND 15 . 57% RESPECTIVELY FOR AY 2008 - 09 IS CONCERNED , THE MAIN CONTENT I ON OF THE APPELLANT I S THAT THE ABOVE CONCERNS MANUFACTURE VITRIFIED T IL ES WHERE AS THE APPELLANT MAKES GLAZED FLOOR TILES AND, THEREFORE , THE SAME CANNOT BE ACCEPTED AS COMPARABLE CASES . HOWEVER, IT CAN ' T BE DENIED THAT PRODUCT MAY NOT BE IDENT I CAL BUT IS A SIMILAR PRODUCT WI TH NOT MUCH VARIATION IN THE ACTUAL PRODUCTION ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 27 P R OCESS . IN VIEW OF THE ABOVE ALSO, IT CAN BE SAFELY CONCLUDED THAT THE NET PROFIT SHOWN BY THE APPELLANT DOES NOT INCLUDE THE PORTION OF PROFIT WITH REFERENCE TO THE SUPPRESSED SALES BY ANY STRETCH OF IMAGIN ATION RATHER THE REPORTED GP / NP IS SUBSTANTIALLY SUPPRESSED . 9 . 14 CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THE PROFIT ELEMENT IN RESPECT OF SUPPRESSED SALES ESTIMATED BY THE AO @ 25% IS FAIR , REASO NABLE AND PERFECTLY JUSTIFIED . 9 . 15 HOWEVER, TH E HON'BLE ITAT IN THE CASE OF M/ S VRUNDAVAN CERAMICS P . LTD . AND M/ S GOKUL CERAM I CS P . LTD . FOR AY 2007 - 08 ON THE IDENTICAL FACTS AND CIRCUMSTANCES OF THE PRESENT CASE , HAS EST I MATED THE PROF I T @ 9% ON SUPPRE SSED SALES BY CONSI DERING THE AVERAGE PROFIT OF M/ S VRUNDAVAN CERAM I CS P . LTD . AND M/ S GOKUL CERAMICS P . LTD . AS WEL L AS COMPARABLE CASES OF M/S RAMCO CERAMICS LTD AND M/ S FERRO GLAZED T I LES PVT . L T D . CONSIDERING THE BINDING RATIO OF THE ABOVE DECISION AND FOLLOWING THE PRINCIPLES OF JUD I C I A L DISCIPLINE, I DIRECT THE AO TO ESTIMATE THE PROFIT ON SUPPRESSED SALES @ 9% ONLY AND TAX T H E SAME AS UNACCOUNTED INCOME. ACCORDINGLY, THE ADDITION TO THE EXTENT OF 9% OF SUPPRESSED SALES (9% OF RS . 17,56,54,060 / - ) AMOUN TING TO RS . 1,58,08 , 865/ - IS CONFIRMED. THE BA L ANC E ADDITION IS DELETED. 10. BEFORE US, REVENUE HAS OPPOSED THE RESTRICTION OF PROFIT ON SUPPRESSED SALE @ 9% AS AGAINST 25% AS DETERMINED BY ASSESSING OFFICER AND THEREBY REQUESTED THAT CIT(A) WAS NOT JUSTI FIED IN RESTRICTING THE ADDITION TO RS.1,58,08,865/ - OUT OF TOTAL ADDITION OF RS.4,39,13,515/ - . ACCORDINGLY, ORDER OF CIT(A) ON THE ISSUE BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED T HAT CIT(A) ERRED IN FACTS AND LAW IN CONFIRMING THE REJECTION OF BOOKS RESULT AND CONFIRMING THE ESTIMATED ADDITION ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 28 ON ACCOUNT OF SUPPRESSED SALE AND PROFIT. CIT(A) ALSO ERRED ON FACTS AND ALSO IN LAW IN OBSERVING THAT PROFIT ELEMENT IN RESPECT OF SUPPRES SED SALES ESTIMATED BY ASSESSING OFFICER @ 25% IS REASONABLE. THE FINDING OF ASSESSING OFFICER IS TOTALLY UNJUSTIFIED AND CONTRARY TO THE FACTS ON RECORD AND MATTER ACCORDINGLY BE QUASHED. LEARNED AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT CIT(A) E RRED IN ALLEGING THAT ASSESSEE HAS SUPPRESSED MRP TO THE TUNE OF RS.17,56,54,060/ - ON WHICH IT WOULD HAVE EARNED PROFIT @ 9% AND THEREBY RETAINING /CONFIRMING ADDITION OF RS.1,58,08,865/ - ON ACCOUNT OF ALLEGED SUPPRESSED PROFIT. LEARNED AUTHORIZED REPRESE NTATIVE SUBMITTED THAT T HE ADDITION SUSTAINED AS MENTIONED ABOVE IS TOTALLY UNJUSTIFIED ON FACT ALSO IN LAW AND DESERVES TO BE DELETED AND ACCORDINGLY SAME BE DELETED. WE FIND THAT ITAT, RAJKOT BENCH IN ITA NO. 141/RJT/2011 FOR A.Y. 2007 - 08 IN CASE OF VRU NDAVAN CERAMICS PVT. LTD. IN SIMILAR SET OF FACTS HAS RESTRICTED THE NET PROFIT TO 9% BY OBSERVING AS UNDER: 19. NOW THE QUESTION REMAINS TO BE SEE THAT UNDER THE FACTS AND CIRCUMSTANCES WHAT SHOULD BE THE FAIR AND REASONABLE PROFIT ON SUPPRESSED TURNOVER. THE NET PROFIT RATE IN THE CASE OF ASSESSEES AND COMPARABLE CASES ARE 13.20%, 10.68% AND 7.38%, 3.65% IN CASE OF VRUNDAVAN CERAMICS PVT. LTD., GOKUL CERAMICS PVT. LTD.. RAMCO CERAMICS PVT. LTD. AND FERRO GLAZED TILES PVT. LTD. RESPECTIVELY. AS DISCUSSED A ND STATED ABOVE THAT THE ABOVE NET PROFIT RATE OF ASSESSEES INCLUDES SOME PORTION OF PROFIT OF SUPPRESSED TURNOVER. THEREFORE, TO GIVE EFFECT OF THAT AND ON ACCOUNT OF FAIR AND REASONABLE ESTIMATION, WE ARE OF THE VIEW THAT THE AVERAGE NET PROFIT RATE OF A LL 4 UNITS WILL BE A GOOD BASIS FOR FAIR AND REASONABLE ESTIMATION OF PROFIT ON SUPPRESSED TURNOVER. IT IS SETTLED POSITION THAT IN ESTIMATION, SOME ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 29 GUESS WORK CANNOT BE RULED OUT. THE AVERAGE NET PROFIT RATE OF ALL 4 UNITS COMES TO 8.72%. IN THAT RATE, IF WE INCLUDE 0.28% TO COVER MISCELLANEOUS BENEFIT OF THE TURNOVER OUT OF THE BOOKS OF ACCOUNT, THAT WILL BE A FAIR AND REASONABLE RATE OF PROFIT WHICH COMES TO 9%. THIS RATE OF 9% NET PROFIT WILL BE FAIR AND REASONABLE ON THIS COUNT ALSO THAT THE ASSESSEE W ILL NOT GET MAJOR BENEFIT OF PROFIT OF EVASION OF EXCISE DUTY AS EXCISE DEPARTMENT HAS ALREADY TAKEN ACT ION IN THIS REGARD. ON APPLICATION OF 9% RATE OF PROFIT, THE RELEVANT CALCULATIONS ARE AS UNDER: - PARTICULARS VRUNDAVAN GOKUL SUPPRESSED SALE 21,52,03,905 8,00, 77,050 9% NET PROFIT RATE FOR 1,93,68,351 72,06,934 ESTIMATION ADDITION SUSTAINED BY 2,84,06,905 85,52,229 CIT(A) 9% PROFIT ADDITION 1,93,68,351 72,06,934 SUSTAINABLE BALANCE EXCESS 90,38,554 13,45,295 20. IN ACCORDANCE WITH ABOVE CALCULATION, WE CONFIRM THE ADDITION TO THE EXTENT OF RS.1,93,68,351/ - IN THE HANDS OF VRUNDAVAN AND RS.72,06,934/ - IN THE HANDS OF THE GOKUL AND BALANCE ADDITION RS.90,38,554/ - IN CASE OF VRUNDAVAN AND RS.13,45,295/ - IN THE CASE OF GOKUL OUT OF THE TOTAL ADDITION SUSTAINED BY CIT(A) ARE DELETED. 21. THE LEARNED REPRESENTATIVES OF THE PARTIES SUBMITTED THAT FACTS OF THE CASE IN GOKUL CERAMICS PVT. LTD. ARE SIMILAR. THEREFORE, THE CROSS APPEAL OF THAT CASE IS ALSO DECIDED IN ACCORDANCE WITH ABOVE DISCUSSION. ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 30 22. IN THE RESULT, APPEALS OF ASSESSEE ARE PAR TLY ALLOWED AND APPEALS BY REVENUE ARE DISMISSED. SUBSEQUENTLY HON BLE GUJARAT HIGH COURT IN SPECIAL CIVIL APPLICATION NO.6500 OF 2012 IN CASE OF FUTURA CERAMIC PVT. LTD. VS. STATE OF GUJARAT IN ITS DATED 20 TH DECEMBER, 2012, IN SIMILAR SITUATION OBSERV ED AS UNDER: FROM THE ABOVE, IT CAN BE SEEN THAT THE ASSESSMENT WHICH WAS PREVIOUSLY CONCLUDED WAS REOPENED ON THE PREMISE THAT DURING THE EXCISE RAID, IT WAS REVEALED THAT THE PETITIONER HAD CLANDESTINELY REMOVED GOODS WITHOUT PAYMENT OF EXCISE DUTY. THE SALES TAX DEPARTMENT, THEREFORE, FORMED A BELIEF THAT THE VALUE OF GOODS PLUS EXCISE DUTY EVADED SHOULD FORM PART OF THE TURNOVER OF THE ASSESSEE FOR THE PURPOSE OF TAX UNDER THE VALUE ADDED TAX ACT. IT MAY BE THAT THE RAID CARRIED OUT BY THE EXCISE DEPA RTMENT AND THE MATERIAL COLLECTED DURING SUCH PROCEEDINGS CULMINATING INTO ISSUANCE OF A SHOW - CAUSE NOTICE FOR RECOVERY OF UNPAID EXCISE DUTY AND PENALTY IN A GIVEN CASE SUFFICIENT TO RE - OPEN PREVIOUSLY CLOSED ASSESSMENT. IN THIS CASE, HOWEVER, WE ARE NOT CALLED UPON TO JUDGE THIS ISSUE AND WOULD THEREFORE NOT GIVE ANY DEFINITE OPINION. THE QUESTION, HOWEVER, IS WHETHER ON A MERE SHOW CAUSE ISSUED BY THE EXCISE DEPARTMENT, THE SALES TAX DEPARTMENT CAN MAKE ADDITIONS FOR THE PURPOSE OF COLLECTING TAX UNDER T HE GUJARAT VALUE ADDED TAX ACT WITHOUT ANY FURTHER INQUIRY. IF THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX HAS UTILIZED THE MATERIAL COLLECTED BY THE EXCISE DEPARTMENT; INCLUDING THE STATEMENTS OF THE PETITIONER AND OTHER RELEVANT WITNESSES AND HAD COME T O AN INDEPENDENT OPINION THAT THERE WAS IN FACT EVASION OF EXCISE DUTY BY CLANDESTINE REMOVAL OF GOODS, HE WOULD HAVE BEEN JUSTIFIED IN MAKING ADDITIONS FOR THE PURPOSE OF VAT ACT. IN THE PRESENT CASE, HOWEVER, NO SUCH EXERCISE WAS UNDERTAKEN. ALL THAT TH E ASSESSING OFFICER DID WAS TO RELY ON ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 31 THE SHOW - CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT. NOWHERE DID HE CONCLUDE THAT THERE WAS A CASE OF CLANDESTINE REMOVAL OF GOODS WITHOUT PAYMENT OF TAX UNDER THE VAT ACT. MERELY BECAUSE THE EXCISE DEPARTMENT ISSUE D A SHOW - CAUSE NOTICE, THAT CANNOT BE A GROUND TO PRESUME AND CONCLUDE THAT THERE WAS EVASION OF EXCISE DUTY IMPLYING THEREBY THAT THERE WAS ALSO EVASION OF TAX UNDER THE VAT ACT. IT IS NOT EVEN THE CASE OF THE DEPARTMENT THAT SUCH SHOW - CAUSE NOTICE PROCEE DINGS HAS CULMINATED INTO ANY FINAL ORDER AGAINST THE PETI TIONER. WE WONDER WHAT WOULD HAPPEN TO THE ORDER OF REASSESSMENT, IF ULTIMATELY THE EXCISE DEPARTMENT WERE TO DROP THE PROCEEDINGS WITHOUT LEVYING ANY DUTY OR PENALTY FROM THE PETITIONER. ALL IN A LL, THE ASSISTANT COMMISSIONER HAS ACTED IN A MECHANICAL MANNER AND PASSED FINAL ORDER OF ASSESSMENT MERELY ON THE PREMISE THAT THE EXCISE DEPARTMENT HAS ISSUED A SHOW - CAUSE NOTICE ALLEGING CLANDESTINE REMOVAL OF THE GOODS. SUCH ORDER, THEREFORE, CANNOT BE SUSTAINED AND IS ACCORDINGLY QUASHED. WHEN THE ORDER IS EX FACIE ILLEGAL AND WHOLLY UNTENABLE IN LAW, MERE AVAILABILITY OF ALTERNATIVE REMEDY WOULD NOT PRECLUDE US FROM INTER FERING AT THIS STAGE IN A WRIT PETITION. THUS, HON BLE JURISDICTIONAL HIGH COU RT HELD THAT CONCERN ASSISTANT COMMISSIONER , SALES TAX WAS NOT JUSTIFIED IN INITIATIN G ACTION AND PASSING FINAL ASSESSMENT ORDER MERELY ON THE PREMISES THAT EXCISE DEPARTMENT HAS ISSUED A SHOW CAUSE NOTICE ALLEGING CLANDESTINE REMOVAL OF GOOD S . SUCH ORDER WAS QUASHED. 1 0 . 1 SIMILAR VIEW HAS BEEN TAKEN BY HON BLE GUJARAT HIGH COURT IN SPECIAL CIVIL APPLICATION NO. 1038 OF 2013 IN CASE OF FUTURA CERAMIC PVT. LTD. VS. STATE OF GUJARAT IN ITS ORDER DATED 13.11.2013 BY OBSERVING AS UNDER: [6.0] IN VIEW OF THE ABOVE DECISION OF DIVISION BENCH OF THIS COURT, THE IMPUGNED REASSESSMENT ORDER DESERVES TO BE ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 32 QUASHED AND SET ASIDE. HOWEVER LIBERTY CAN BE RESERVED IN FAVOUR OF THE DEPARTMENT TO PASS AN ORDER AFRESH IN ACCORDANCE WITH LAW AND ON MERITS AFTER GIVING AN OPPORTUNITY TO THE PETITIONER AND IF PERMISSIBLE UNDER THE LAW NOW. [6.1] IN VIEW OF THE ABOVE AND FOR THE REASONS STATED ABOVE, PETITION SUCCEEDS. IMPUGNED ORDER PASSED BY THE ASSISTANT COMMERCIAL COMMISSIONER TAX (2), NADIAD [ANNEXUREF TO THE PETITIO N] DATED 31.03.2012 IS HEREBY QUASHED AND SET ASIDE. HOWEVER, IT IS OBSERVED THAT THE SAME SHALL NOT AFFECT THE P ROCEEDINGS UNDER THE CENTRAL EXCISE ACT FOR WHICH THE SHOWCAUSE NOTICE HAS BEEN ISSUED. A LIBERTY IS ALSO RESERVED IN FAVOUR OF THE DEPARTMENT TO PASS REASSESSMENT ORDER AFRESH IN ACCORDANCE WITH LAW AND ON MERITS AND AFTER GIVING FULLEST OPPORTUNITY TO THE PETITIONER AND IF PERMISSIBLE UNDER THE LAW NOW. RULE IS MADE ABSOLUTE TO THE AFORESAID EXTENT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HERE SHALL BE NO ORDER AS TO COSTS. AGAIN IN THIS CASE REASSESSMENT WAS SET ASIDE ON THE GROUND THAT SAME WAS MECHANICALLY PASSED. 10. 2 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE FIND THAT IT IS UN DISPUTED THAT INCOME TAX PROCEEDINGS ARE ARISING FROM THE RATE OF EXCISE DEPARTMENT AND MATERIAL COLLECTED DURING SEARCH PROCEEDINGS CULMINATED INTO ISSUANCE OF SHOW CAUSE NOTICE FOR RECOVERY OF UNPAID EXCISE DEPARTMENT AND PENALTY IN GIVEN CASES. WITHOUT PREJUDICE TO THE FINDING OF CUSTOM, EXCISE DEPARTMENT, QUESTION BEFORE US IS WHETHER ON MERE SHOW CAUSE NOTICE ISSUED BY EXCISE DEPARTMENT CAN BE MADE BASIS OF ADDITION FOR THE PURPOSE OF INCOME TAX ACT. INCOME TAX OFFICER HAS UTILIZED THE MATERIAL COLLE CTED BY EXCISE DEPARTMENT INCLUDING STATEMENT OF PETITIONER AND OTHER RELEVANT PERSONS AS DISCUSSED ABOVE AND ON ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 33 THE BASIS OF SAME. HE W OULD HAVE BEEN JUSTIFIED IN MAKING ADDITION FOR THE PURPOSE OF INCOME TAX DEPARTMENT IN PRESENT CASE BY INDEPENDENT ENQU IRIES BY CONCERN INCOME TAX AUTHORITIES. N O SUCH EXERCISE WAS UNDERTAKEN BY INCOME TAX DEPARTMENT AT ALL . ASSESSING OFFICER HAS SIMPLY RELIED ON SHOW CAUSE NOTICE ISSUED BY EXCISE DEPARTMENT. NOWHERE DID HE CONCLUDE THAT THERE WAS A LARGE SCALE REMOVAL OF GOODS WITHOUT PAYMENT OF TAX UNDER INCOME TAX ACT. MERELY BECAUSE EXCISE DEPARTMENT ISSUED SHOW CAUSE NOTICE , THAT ALONE CANNOT BE A GROUND TO ASSUME AND CONCLUDE THAT THERE WAS EVASION OF INCOME TAX ACT AS WELL . IT IS NOT EVEN THE CASE OF DEPARTMENT THAT SUCH SHOW CAUSE NOTICE PROCEEDING H AS CULMINATED INTO ANY FINAL ORDER AGAINST PETITIONER. THIS MAKES IT CLEAR THAT CONCERN INCOME TAX OFFICER HAS ACTED UPON IN MECHANICAL MANNER AND PASSED ORDER OF ASSESSMENT MERELY ON PREMISES OF EXCISE DEPARTMENT I SSUED SHOW CAUSE NOTICE ALLEGING LARGE SCALE REMOVAL OF GOODS. THIS VIEW IS FORTIFIED BY DECISION OF HON BLE GUJARAT HIGH COURT IN CASE OF FUTURA CERAMIC PVT. LTD. (SUPRA). ITAT, RAJKOT BECNH IN ITA NO. 141/RJT/2011 FOR A.Y. 2007 - 08 WAS NOT HAVING ADVANTA GE OF ABOVE LEGAL DISCUSSION ON THIS ISSUE OF MAINTAINABILITY . UNDER FACTS AND CIRCUMSTANCES, ORDER OF CIT(A) CANNOT BE SUSTAINED. ACCORDINGLY , ORDER OF ASSESSING OFFICER ON THIS ISSUE IS QUASHED. IN VIEW OF ABOVE, ISSUE RAISED IN REVENUE S APPEAL GOES ACADEMIC. SAME MAY BE RAISED AS AND WHEN SITUATION ARISES FOR THIS. 10. 3 SIMILAR ISSUE AROSE IN OTHER ASSESSEES CASE. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, WE HOLD THAT ORDERS ITA NOS. 117 & 142 / R JT/ 13, 113 & 150 / R JT/ 13, 109 & 146 / R JT/ 13, 105 & 138 / R JT/ 13, 99 & 132 / R JT/ 13, 100 & 133 / R JT/ 13 & 125 & 169 / R JT/ 13 PAGE 34 PASSED BY INCOME TAX OFFICER CANNOT BE SUSTAINED AND SAME ARE UPHELD. 11. IN RESULT, APPEALS OF REVENUE ARE DISMISSED AND THAT OF ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 25 TH DAY OF MAY , 201 5 . SD/ - SD/ - (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT : DATED 25 /0 5 /2015 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, RAJKOT 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT
