DCIT, Central Circle-6, Hyderabad V. M/s Balaji Steel Rolling Mills Pvt Ltd., Hyderabad

ITA 227/HYD/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3074 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 16-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 13-02-2012
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Keywords: Search and seizure; Document seized; Documents seized
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND S HRI S .S. VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 225/HYD/2012 2002 - 03 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 6, HYDERABAD M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., HYDERABAD [PAN: AAACB8286C] 2 26/HYD/2012 2003 - 04 227/HYD/2012 2004 - 05 228/HYD/2012 2005 - 06 229/HYD/2012 2006 - 07 230/HYD/2012 2007 - 08 862/HYD/2012 2001 - 02 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 6, HYDERABAD M/S. BALAJI STEEL ROLLING INDUSTRIES HYDERABAD [PAN: AEFB1295Q] 863/HYD/2012 2002 - 03 864/HYD/2012 2003 - 04 865/HYD/2012 2004 - 05 866/HYD/2012 2005 - 06 867/HYD/2012 2006 - 07 868/HYD/2012 2007 - 08 27/HYD/2013 2008 - 09 1367/HYD/2014 2000 - 01 1555/HYD/2011 2008 - 09 M/S. BALAJI STEEL ROLLI NG MILLS P RIVATE LTD., HYDERABAD [PAN: AAACB8286C] DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 6, HYDERABAD FOR ASSESSEE : SHRI A . SRINIVAS , AR FOR REVENUE : S HRI M. SITARAM , DR DATE OF HEARING : 1 6 - 0 2 - 201 6 DATE OF PRONOUNCEMENT : 19 - 0 2 - 2 01 6 O R D E R PER B ENCH : IN THESE BATCH OF APPEALS ITA N OS . 225 TO 230 /HYD/2012 BY REVENUE, THE APPEALS FOR ASSESSMENT YEARS 2002 - 03 TO 2007 - 08 M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 2 - : ARE IN THE CASE OF M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., WHEREIN BY A COMMON ORDER DATED 07 - 01 - 2011, THE COMMISSIONER OF INCOME TAX (APPEALS) , GUNTUR HAS GIVEN RELIEF ON WHICH REVENUE IS AGGRIEVED. APPEALS FROM ITA NOS. 862 TO 868/HYD/2012 ARE ALSO BY REVENUE IN THE CASE OF M/S. BALAJI STEEL ROLLING INDUSTRIES , AGGRIEVED ON THE COMMON ORDER OF THE CIT(A ), GUNTUR, DT. 14 - 03 - 2011 FROM ASSESSMENT YEARS 2001 - 02 TO 2007 - 08. APPEAL IN ITA NO. 1367/HYD/2014 IS BY REVENUE FOR AY 2000 - 01 AGAINST THE ORDER OF THE CIT(A) - I, HYDERABAD , DT. 19 - 05 - 2014 WHEREAS APPEAL IN ITA NO. 27/HYD/2013 IS OF THE SAME ASSESSEE A GAINST THE ORDER OF CIT(A) - I, DT. 25 - 10 - 2012 FOR AY. 2008 - 09. THUS, IN ALL THE ABOVE REVENUE APPEALS, IN THE CASE O F 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. BALAJ I STEEL ROLLING MILLS PVT. LTD. SINCE COMMON ISSUE IS INVOLVED IN ALL THESE APPEALS, WE HAVE CONSIDERED THEM TOGETHER AND DEC IDED 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 TH E BUSINESS PREMISES OF M/S. BALAJI STE EL ROLLING MILLS PVT. LTD AS WELL AS ITS SISTER CONCERN M/S. BALAJ I 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 200 5 - 06. THE ASSESSMENTS FROM ASSESS MENT YEARS 2001 - 02 TO 2008 - 09 WERE COMPLETED AT VARIO US PERIODS BUT ON SIMILAR LINES. T HE ASSESSMENTS UPTO ASSESS MENT YEARS 2005 - 06 ARE U/S. 143(3) R.W.S. 153A , WHEREAS SUBSEQUENT M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 3 - : ASSESSMENT YEARS 2006 - 07, 2007 - 08 & 2008 - 0 9 ARE U/S. 143(3). SIMILARLY, IN THE CASE OF M/S. BALAJI STEEL ROLLING INDUSTRIES ALSO THE ASSESSMENTS FROM THE ASSESSMENT YEARS 2000 - 01 TO 2005 - 06 WERE COMPLETED U/S. 143(3) R.W.S. 153 A , WHEREAS ASSESSMENTS FOR ASSESSMENT YEARS 2006 - 07 TO 2008 - 09 ARE COM PLETED U/S. 143(3). M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., 2.1 . FOR THE SAKE OF CONVENIENCE AND CLARITY, THE FACTS IN ITA NO. 225/HYD/2012 FOR THE AY. 2002 - 03 IN THE CASE OF M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., IS CONSIDERED IN DETAIL. ITA N O. 225/HYD/2012 (AY. 2002 - 03) 3. IN THIS ASSESSMENT YEAR, ASSESSEE HAD ORIGINALLY FILED RETURN OF INCOME AND CONSEQUENT TO THE NOTICE U/S. 153A, FILED RETURN ADMITTING THE SAME LOSS OF RS. 1,01,187/ - AS ORIGINALLY RETURNED. EVEN THOUGH THERE WERE SEARCH AND SEIZURE OPERATIONS , AS SEEN FR OM THE ASSESSMENT ORDERS PASSED THERE SEEMS TO BE NO INCRIMINATING MATERIAL IN THE SEARCH IDENTIFIED AND SEIZED. EVEN THOUGH CERTAIN DOCUMENTS PERTAINING TO QUANTITYS DETAILS, DETAILS OF SALES AND CERTAIN TRANSAC TIONS WITH THE PARTIES AT JABALPUR, NAGPUR AND HYDERABAD ETC., WERE SEIZED AND LISTED AS A SPECIFIC REFERENCE IN PARA 3 OF THE ORDER UNDER THE HEAD SEIZED MATERIAL A S SEEN FROM THE ORDER (S) , THERE IS NO CORRELATION WITH THOSE SEIZED DOCUMENTS WITH REFER ENCE TO ANY OF THE SPECIFIC ISSUES CONSIDERED BY THE AO. WHEN ENQUIRED IN THE COURSE OF ARGUMENTS, LD. COUNSEL ADMITTED THAT THOSE DETAILS ARE NOT INCRIMINATING BUT NEITHER ASSESSEE NOR AO BOTHERED TO EXAMINE ABOUT THESE DOCUMENTS. THE ONLY ISSUE TAKEN U P BY THE AO IS WITH REFERENCE TO M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 4 - : UNACCOUNTED PRODUCTION BASED ON THE ELECTRICITY CONSUMPTION OF THE UNIT. AO IN THE COURSE OF ASSESSMENT NOTICED THAT ASSESSEE HAD ADOPTED A M ODUS OPERAND I OF INTRODUCING CASH IN SUBSTANTIAL AMO UNTS DURING THE FINANCIAL YEA R AS ADVANCES AND OFFERING THEM AS INCOME U NDER THE HEAD OTHER INCOME A T THE END OF THE YEAR, AS ADVANCES FORFEITED. AO NOTED DOWN IN PARA 5 OF THE ORDER THE EXTENT OF ADVANCES SO FORFEITED TOTALING TO RS. 9,19,35,000/ - . EVEN THOUGH ASSESSEE OFFERED ON THESE AMOUNTS A S INCOMES UNDER REGULAR RETURNS AND NO T AS A CONSEQUENCE OF SEARCH, AO WAS OF THE VIEW THAT ASSESSEE COULD NOT SUBSTANTIATE FROM WHOM THE ADVANCES WERE RECEIVED. HE WAS OF THE OPINION THAT ASSESS EE MIGHT BE PRODUCING THE S TEEL INGOTS OUTSI DE 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 . BAS ED 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 INGOT S IS GENERALLY ABOUT 800 850 KWH. HE ALSO OPINED THAT AS FAR A S PRESENT OPERATIONS ARE CONCERNED, THE CONSUMPTION MAY BE ABOUT 1100 1200 PER KWH PER TON OF INGOT S CONSID ERING ASSESSEES BUSINESS OP ERATIONS. ON OBTAINING THE INFORMATION FROM CENTRAL POWER DISTRIBUTION COMPANY LIMITED AND TAKING THE CONSUMPTION IN A Y. 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 PRODU CTION AT 4,701 TONS. AFTER ARRIVING AT THE POSSIBLE PRODUCTION, AO GAVE CREDIT FOR THE RAW - MATERIAL THAT MAY BE M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 5 - : REQUIRED TO USE INCLUDING 10% BURNING LOSS AND ADDITIONAL CONSUMPTION OF STORE ITEMS, ARRIVED AT A SUPPRESSED PRODUCTION VALUED AT RS. 1,06,80, 527/ - IN AY. 2002 - 03 AND BROUGHT TO TAX SAME AMOUNT AS SUPPRESSED INCOME. IN ARRIVING AT THIS WORKING, AO ALSO CONSIDERED THE SHOW CAUSE NOTICES ISSUED BY THE EXCISE DEPARTMENT REGARDING EVASION OF EXCISE DUTY DUE TO UNACCOUNTED CLEARANCES, CLEARANCE OF INPUTS WITHOUT PAYMENT OF DUTY, CLEARANCE OF SCRAP WITHOUT PAYMENT OF DUTY AND SHOW CAUSE DT. 28 - 01 - 1998 FOR NON - PAYMENT OF DUTY BUT SETTLED UNDER THE KAR VIVAD SAMADHAN SCHEME. HE ALSO CONSIDERED THE AMOUNTS OF ADVANCES SHOWN IN THE BOOKS TO THE EXTEN T OF RS. 1,49,60,000/ - DURING THE YEAR SHOWN AS INCOME IN THE P&L A/C. 4. WHEN THE ISSUE WAS CARRIED TO THE CIT(A), ASSESSEE FILED VARIOUS GROUNDS AND ALSO ADDITIONAL GROUNDS WHICH WAS REFERRED TO THE AO ON REMAND. LD. CIT(A) AFTER CONSIDERING THE DE TAILED SUBMISSIONS OF ASSESSEE AS EXTRACTED IN PARA 4.3, DELETED THE ADDITIONS SO MADE BY AO , STATING AS UNDER: 4.5 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, GONE THROUGH THE ORDER OF THE ASSESSING OFFICER. IT MAY BE NOTED HERE THAT IT IS A SETTLED MATTER NOW THAT ANY ADDITION BASED ON THE RESULTS OF A SEARCH MUST BE BASED ON THE MATERIAL FOUND DURING THE COURSE OF SEARCH ON WHICH THERE WAS NO EXPLANATION OF THE APPELLANT OR THE EXPLANATION OFFERED BY THE APPELLANT WAS NOT FOUND ACCEPTABLE . IN OTHER WORDS, THERE IS NO PLACE FOR ANY ADDITION IN AN ASSESSMENT IN CONSEQUENCE OF A SEARCH BASED ON SURMISES, GUESS WORK AND IMAGINATION. PRECISELY, THE AO IN THE IMPUGNED ASSESSMENT ORDERS MADE ADDITIONS BASED ON NOT THE MATERIAL FOUND IN SEARCH BUT BASED ON INCORRECT FACTS AND SURMISES, WHICH, PER SE, ARE NOT SUSTAINABLE. ONE OF THE FACTORS RELIED UPON BY THE AO WAS FLUCTUATION IN VALUE OF POWER BILLS VIS A VIS PRODUCTION. AS STATED BY THE APPELLANT, CONSUMPTION OF THE ELECTRICITY DEPENDS UPON T HE VARIOUS FACTORS LIKE NEGLIGENCE OF THE LABOURERS IN SWITCHING ON AND SWITCHING OFF THE POWER CONNECTION ONCE THE MANUFACTURING PROCESS IS COMPLETED, SLOW WORK TACTICS OF THE LABOUR FORCE, TEMPERATURE IN SUMMER WHICH MAKES HUMAN BEING PARTLY M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 6 - : LAZY AND ERR ATIC SUPPLY OF POWER AND LIKE THAT ARE FACTORS THAT EFFECTS PRODUCTION. THEREFORE, I AM INCLINED TO AGREE WITH THE APPELLANT THAT THE BASIS FOR ARRIVING AT THE PRODUCTION ON THE BASIS OF CONSUMPTION OF ELECTRICITY IS NOT CORRECT ESPECIALLY WHEN GOODS ARE SUBJECT TO LEVY 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 29 TH MAY 20 06, 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 AC TION 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 ALSO HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE D ISCUSSED SUPRA, I AM OF THE CONSIDERED OPINION THAT THE IMPUGNED ADDITION FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION WERE ILL FOUNDED AND WITH OUT ANY BASIS AND ALSO NOT AS A CONSEQUENCE OF MATERIAL FOUND DURING THE COURSE OF ACTION UNDER SECTION 132 (1) AND AS SUCH THE AO IS DIRECTED TO DELETE THE SAID ADDITION MADE FOR ALL THE ASSESSMENT YEARS UNDER CHALLENGE. 5. LD. DR WHILE SUPPORTING THE ORDERS OF THE AO SUBMITTED THAT THERE IS NO EXPLANATION FROM ASSESSEE ABOUT EXCESS CONSUMPTION OF ELECTRICIT Y AND ALSO REFERRED TO PRESS REPORT CAME IN BUSINESS STANDARD ABOUT THE JUDGMENT OF THE CEGAT , DT. 09 - 05 - 2011 TO SUBMIT THAT REVENUE FINDS IT DIFFICULT TO ESTABLISH THAT CERTAIN GOODS WERE MANUFACTURED AND REMOVED CLAN DESTINELY. WHILE REFERRING TO CERTAI N PARAS IN THE REPORT, IT WAS SUBMITTED THAT WHILE IN MOST OF THE CASES, MARSHALL ING OF EVIDENCE ACQUIRED FROM THE INVESTIGATION DOES NOT PROVE ENOUGH FOR THE TRIBUNAL OR THE COURSE TO UPHOLD THE ALLE G ATION OF CLANDESTINE REMOVAL , IN FEW CASE S THE ALLEGA TIONS HAVE SURVIVED DUE TO SYSTEMATIC INVESTIGATION BY M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 7 - : SOME VERY HARD WORKING OFFICERS OF THE DEPARTMENT . THEN, HE REFERRED TO THE FINDINGS IN THE SAID CASE TO SUBMIT THAT FOR PRODUCTION OF ONE METRIC TON OF MILD STEEL INGOTS, THE AVERAGE POWER CONSUMPTI ON WOULD BE IN THE RANGE OF 555 KWH 1026 KWH AS PER THE SCIENTIFIC STUDIES CONDUCTED BY IIT, KANPUR. IT WAS SUBMITTED THAT IN THIS CASE ALSO , THE AO HAS EXAMINED THE ISSUE METICULOUSLY AND ARRIVED AT THE SUPPRESSED PRODUCTION AND CIT(A) WAS NOT CORRECT IN DELETING THE SAME. 6. LD. COUNSEL FOR ASSESSEE HOWEVER, RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT : A) ADDI TION CANNOT BE MADE WHEN THE BOOKS OF ACCOUNTS ARE NOT REJECTED AND ASSESSEES BOOKS AND RESULTS THEREON HAVE BEEN ACCEPTED BY THE A O; B) THERE IS NO INCRIMINATING MATERIAL EITHER OF SUPPRESSED PRODUCTION OR OF SALES OUTSIDE THE BOOKS OF ACCOUNTS DURING THE SEARCH. THERE IS NOT EVEN AN EXCESS STOCK OR RAW - MATERIAL AVAILABLE WITH ASSESSEE; C) M ATERIAL OBTAINED POST SEARCH THAT TOO REFERENCE M ADE TO SPONGE IRON INDIA LTD., COULD NOT BE THE BASIS FOR MAKING ADDITION ON PRESUMPTIONS AND SURMISES. IT WAS SUBMITTED THAT THERE IS NO BASIS FOR MAKING ANY ADDITION THEREFORE, THE ENTIRE ADDITION MADE BY THE AO IS NOT SUSTAINABLE. 6.1 . COMING TO THE L EGAL GROUNDS, IT WAS SUBMITTED 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 M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 8 - : DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., VS. DCIT [137 ITD 287 (SB)] A S CONFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUS ING 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 NO T HAVING INCRIMINATING MATERIAL LD. COUNSEL SUBMITTED THAT THE CO - ORDINATE BENCH AT BOMBAY I N 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, RETURN E D/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 RELIED BEFORE THE CIT(A) TO SUBMIT THAT THERE IS NO SUPP RESSED PRODUCTION OR SUPPRESSED SALES AS PER THE CENTRAL EXCISE/ SALES TAX AUTHORITIES. IT WAS SUBMITTED THAT ORDER OF THE CIT(A) IS TO BE UPHELD. 7 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED AND ORDERS OF THE AUTHORITIES. AS CAN BE SEEN FROM THE ORDERS OF THE AO , EVEN THOUGH IT REFERS TO CERTAIN DOCUMENTS WHICH ARE IMPOUNDED / SEIZED, NO ADVERSE VIEW WAS TAKEN ABOUT THE CONTENTS THEREIN . T HE ORDER DOES NOT SPEAK OF ANY INCRIMINATING NATURE OF THE SAID DOCUMENTS. THE ONLY ISSUE WHIC H AO H AS A DJUDICATED IS THE HIGH CONSUMPTION OF ELECTRICITY IN ASSESSEES CASE. AS PER THE AVERAGE NORM OF AN IDEAL BUSINESS SITUATION, THE POWER CONSUMPTION WOULD BE AROUND 800 1000 KWH, ON WHICH THERE M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 9 - : ARE VARIOUS STUDIES. BUT IS IT POSSIBLE TO DETERMINE THE UN ACCOUNTED PRODUCTION ON THE BASIS OF THE IDEAL CONSUMPTION OF POWER IN AN IDEAL UNIT. GENERALLY IN THE MARKET, VARIOUS CARS ARE SOLD WITH THE PROJECTION OF 20 TO 23 KMS PER LITER OF MILEAGE BUT ON ROAD CONDITIONS, IT IS EVERYBODYS EXPERIENCE THAT CAR DOE S NOT GIVEN MORE THAN 10 TO 12 KMS MILEAGE PER LITER. THERE IS A LOT OF VARIATION BETWEEN IDEAL TEST CONDITIONS AND ACTUAL BUSINESS CONDITIONS. IT WAS ASSESSEES EXPLANATION THAT HIGH POWER CONSUMPTION WAS A RESULT OF : I. BECAUSE OF THE NATURE OF THE UNIT ; II. UN - SKILLED WORKERS; III. UN - SCHEDULED POWER - CUTS; IV. PRODUCTION SCHEDULES IN VIEW OF THIS, IT WAS SUBMITTED THAT CONSUM PTION OF POWER IS HIGH. AO HAS TAKEN SUFFICIENT PAIN S IN REFERRING THE MATTER TO THE CHAIRMAN AND MANAGING DIRECTOR OF SPONGE IRON INDIA LTD. , AND ALSO BEING EXAMINED BY A TECHNICAL OFFICER OF THE SAID COMPANY, BUT THERE IS A DISCLAIMER BY THE COMPANY ITSELF THAT THOSE STATEMENTS MADE BY THE TECHNICAL OFFICER IS BASED ON HIS PERSONAL EXPERIENCES AND CANNOT BE USED ADVERSELY. THAT IT SELF TAKES AWAY THE BASIS OF AOS WORKING. NOT ONLY THAT, AO HIMSELF ACCEPTS THAT ASSESSEES CONSUMPTION OF 1,260 KWH IS ON THE BASIS OF THE PRODUCTION FIGURES AS SHOWN IN AY. 2001 - 02. HE HAS TAKEN THAT YEAR AS BASIS FOR ARRIVING AT THE PRODUCTION IN ALL THE IMPUG NED ASSESSMENT YEARS INCLUDING THE LATER YEAR OF 2006 - 07 TO 2008 - 09 (POST SEARCH) ON THE SAME BASIS. HE HA S NOT CONSIDERED THE OBJECTIONS RAISED BY ASSESSEE AT ALL. MOREOVER, AS EXPLAINED BY ASSESSEES COUNSEL AND ALSO CONSIDERED THE LD. CIT(A), THE VARI OUS M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 10 - : SHOW CAUSE NOTICES ISSUED BY THE EXCISE DEPARTMENT HAVE BEEN MORE O R LESS SETTLED IN FAVOUR OF ASSESSEE AND NO ADVERSE VIEW CAN BE TAKEN ON THE BASIS OF THE SHOW CAUSE NOTICES. I T 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 REL IED 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. I N THIS CASE, IN SPITE OF CONDUCTING SEARCH AND SEIZURE OPERATIONS, NO INCRIMINATIN G MATERIAL WAS FOUND. A S SEEN FROM THE ORDER IN ITA NO. 1555/HYD/2011 (WHICH WILL BE CONSIDERED LATER IN TH IS 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, ASSESSEES INCOME OFFERED BY WAY OF FORFEITURE OF ADVANCES IS TO THE EXTENT OF RS. 1,49,60,0 00/ - 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 NOT REJECTED. T HE ADDITION MADE BY THE AO IS PURELY ON THE BASIS OF ESTIMATION OF POWER CONSUMPTION AND SUPPOSED LY SUPPRESSED PRODUCTION CANNOT BE SUSTAINED IN THE ABSENCE OF ANY EVIDENCE ON RECORD. KEEPING THESE ASPECTS IN MIND, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND REJECT THE REVENUES G ROUNDS. IN THE RESULT, THIS APPEAL IS DISMISSED. ITA NOS. 226 TO 230/HYD/2012 8 . THE FACTS BEING SAME EXCEPT AMOUNTS INVOLVED IN THE ABOVE APPEALS, WE UPHOLD THE ORDERS OF THE CIT(A) AND REJECT THE REVENUES CONTENTIONS. M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 11 - : 9 . IN THE RESULTS, APPEALS IN ITA NOS. 225 TO 230/HYD/2012 ARE DISMISSED. M/S. BALAJI STEEL ROLLING INDUSTRIES: 1 0 . AS SEEN FROM VARIOUS APPEALS REVENUE HAS COMPLETED ASSESSMENTS OF THIS FIRM USING THE COMPANY PAN NUMBER. ONLY IN AY .2008 - 09 THE CORRECT PAN NUMBER IS USED. IN THESE APPEALS ALSO, SIMILAR TO THE ONE WHICH AO PASSED IN THE APPEALS OF M/S. BALAJI STEEL ROLLING MILLS PVT. LTD. ABOVE, THE AO ESTIMATED THE SUPPRESSED PRODUCTION ON SIMILAR LINES. LD. CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSIONS, DELETED THE ADDITION MOR E OR LESS ON THE SIMILAR REASONS AS STATED ABOVE. FOR THE SAKE OF RECORD, IN AY. 2001 - 02, AO MADE AN ADDITION OF RS. 30,91,330/ - BY ARRIVING AT THE SUPPRESSED INCOME WHILE DETERMINING THE POWER CONSUMPTION FOR PRODUCTION OF ONE TON OF FLATS AND RODS IN ASSESSEES BUSINESS AT 200 KWH , AFTER RECORDING THAT THE SISTER CONCERN IN AY. 2000 - 01 CONSUMED ONLY 132 KWH PER TON. HE ALSO ALLOWED BURNING LOSS OF 12% FOR THE PURPOSE OF DETERMINING REQUISITE RAW - MATERIAL . SINCE ELECTRICITY WAS ALREADY DEBITED TO THE P &L A/C, THE SUPPRESS ED CONSUMPTION OF RAW - MATERIAL WA S GIVEN SET OFF AGAINST THE SUPPRESSED SALES OF PRODUCTION AND A NOMINAL CONSUMPTION OF STORE ITEMS. ON CONSUMPTION OF 2,83,573/ - UNITS OF POWER, AO ARRIVED AT SURPLUS PRODUCTION AT 1,212 TONS AND DETER MINED THE INCOME AT RS. 30,91,3 3 0 / - . LD. CIT(A) VIDE ORDER DT. 14 - 03 - 2011, DELETED THE SAME BY STATING AS UNDER: 4.4. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, SEEN THE ASSESSMENT ORDERS AND ALL OTHER MATERIAL PLACED BEFORE ME. AS PER THE MATERIAL ON RECORD, THE INFORMATION FURNISHED BY THE SUPERINTENDENT OF CENTRAL EXCISE, NACHARAM, L - RANGE, NO DUTY M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 12 - : EVASION HAS BEEN REPORTED IN RESPECT OF THE APPELLANT AND AS SUCH, THE ADDITIONS MADE BY THE AO WERE ILL FOUNDED. 5.1. WITH REGARD TO MAKING ADDITION BY THE AO ON THE BASIS OF POWER CONSUMPTION FOR PRODUCTION, 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 R ECORD, 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 T HE 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 PRODUCTIO N 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 OF PRODUCTION AND PA YMENT OF DUTY ON REMOVAL OF GOODS. SALES TAX ASSESSMENTS HAVE BEEN COMPLETED FOR ALL THE ABOVE ASSESSMENT YEARS AND NO DISCREPANCY HAS BEEN NOTICED IN THE REPORTED TURNOVER. THERE IS NO EVIDENCE WITH THE DEPARTMENT TO PROVE THAT THE APPELLANT HAD MANUFACTU RED CERTAIN GOODS AND REMOVED THEM OTHER THAN WHAT HAS BEEN DECLARED. PROPER EXCISE REGISTERS HAVE BEEN MAINTAINED. THE INFOR M ATION OBTAINED FROM THE TECHNICAL OFFICER CANNOT BE RELIED ON FOR THE SIMPLE REASON THAT THE CHAIRMAN - CUM - MANAGING DIRECTOR OF THE SAID COMPANY HAS SPECIFICALLY STATED IN HIS COMMUNICATION TO THE DEPARTMENT AS UNDER: - 'PLEASE NOTE THAT INFORMATION FURNISHED BY OUR OFFICER IS BASED ON HIS INDIVIDUAL KNOWLEDGE / VIEWS EXPRESSED AND IT CANNOT BE TAKEN IS AN AUTHORITY FOR ANY PURPOSE A S IT MAY DIFFER FROM THE POINT OF VIEW OF OTHER TECHNICAL OFFICER IN OTHER WORDS, THE MANAGING DIRECTOR OF THE SPONGE IRON INDIA LTD., IS NOT SURE ABOUT THE ACTUAL CONSUMPTION OF UNIT FOR MANUFACTURING OF FOODS AS THE APPELLANT ALREADY STATED HEREIN ABO VE CONSUMPTION OF ELECTRICITY DEPENDS UPON THE VARIOUS FACTORS SINCE THE APPELLANT'S UNIT IS A LABOUR ORIENTED, NEGLIGENCE AND LAZINESS OF THE LABOURERS, SLOW WORK TACTICS, TEMPERATURE IN SUMMER WHICH MAKES HUMAN BEING PARTLY LAZY, UNWORKABLE AND SUPPLY OF POWER WITH FREQUENT INTERRUPTION. ALL THESE CAUSE CONSUMPTION OF ELECTRICITY. THEREFORE, THE FIGURE FOR ARRIVING THE PRODUCTION ON THE BASIS OF ELECTRICITY CONSUMPTION IS NOT CORRECT AND PROPER METHOD SPECIALLY, WHEN GOODS ARE SUBJECT TO LEVY OF EXCISE AN D SALES TAX. THE AO HAS NOT M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 13 - : FOUND ANY DEFICIENCY OR DISCREPANCY IN THE BOOKS OF ALE AND HAS NOT REJECTED THEM.' THE APPELLANT HAS PLACED RELIANCE ON THE FOLLOWING CASE LAWS: - (I) N. RAJPULLAIAH VS DCTO, KURNOOL AND ANOTHER (73 ITR 224 AP). (II) ST.T ERASA'S OIL MILL VS STATE OF KERALA REPORTED IN ITR 365 (KERALA) . (III) DCIT VS ROYAL MARWAR TOBACCO PRODUCT (P) LTD., REPORTED IN (AHMD.TRIBUNAL) REPORTED IN 29 SOT 53 (AHD) (URO). WITHOUT PREJUDICE TO THE ABOVE CONTENTION, IT IS, SUBMITTED THAT ON T HE PAGE - 6 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED AS UNDER: - 'THE SUMS INTRODUCED CAMOUFLAGED AS ADVANCE IS SHAM SOURCE FROM THE SUPPRESSED TRADING RECEIPTS INTRODUCED TO MEET THE BASIS RECORDED EXPENDITURE.' THEREFORE, THE ASSESSING OFFICER OUGHT TO HAVE GIVEN CREDIT AGAINST THE ESTIMATED INCOME IN RESPECT 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 F ACTORS 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 TH E SPONGE IRON INDIA LIMITED, A, PUBLIC SECTOR UNDERTAKING THAT IS MODE R NIZED 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' NOT FOUND OUT ANY DISCREPANCIES, IN PRODUCTION AND SALES. THUS, THE ADDITIONS. MADE BY THE AO FOR ALL THE IMPUGNED ASSESSMENT YEARS WITH OUT ANY MATERIAL HAS TO BE PRESUMED BASED ON SURMISES AND GUESS WORK AND FOR SUCH ADDITIONS THERE IS NO PLACE IN SEARCH AND SEIZURE ASSES SMENTS. THUS, I DO NOT HAVE ANY HESITATION IN DIRECTING THE AO TO DELETE THE ADDITIONS MADE FOR ALL THE ASSESSMENT YEARS UNDER CHALLENGE. M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 14 - : 1 1 . AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE ORDERS OF THE AUTHORITIES, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) . IN ALL THE IMPUGNED YEARS, THE ADDITION BEING SIMILAR, THE REASONS GIVEN ABOVE IN THE CASE OF M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., WILL EQUALLY APPLY HERE. IN VIEW OF THE DETAILED REASONS STATED ABOVE, WE DO NOT SEE ANY REASON TO CONSIDER THE REVENUES GROUNDS. IN THE RESULT, ORDER S OF THE CIT(A) ARE UPHELD AND ALL THE APPEALS IN ITA NOS. 862 TO 868/HYD/2012 ARE DISMISSED. ITA NO. 1367/HYD/2014 : 1 2 . THIS ORDER WAS PASSED BY THE CIT(A) ON 19 - 05 - 2014, W HEREIN LD. CIT(A) DELETED THE ADDITION OF RS. 35,97,380/ - BY GIVING THE FOLLOWING REASONS: 06.0 I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE SUBMISSIONS AND ALSO THE APPELLATE ORDERS OF CIT(APPEALS), GUNTUR AND CIT(APPEALS) - I, HYDERABAD. FROM THE O RDER 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 CONSUMPTIO N. 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 TOO K 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 RESU LTS. 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 RNADE BY THE AS SESSING OFFICER WERE BASED ON SURMISES AND GUESS WORK AND THAT THERE WAS NO 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. M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 15 - : 06.2 IN THE ORDE R 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 O N 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 THEI R 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 THE SAID DECISION, THE HON'BLE CHANDIGARH BENCH OF THE ITAT IN THE CASE OF ARORA ALLOYS LTD VS. ITO (ITA NO.78JCSDJ2012 DATED 1 - 3 - 2012) HAVE OPINED THAT THE REASON FOR THE ABOVE VIEW IS THAT CONSUMPTION FOR ELECTRICITY DEPENDS UPON VARIOUS RECRORS IKE TYPE AND QUAL ITY OF SCRAP USED, NUMBER OF BREAK DOWNS, QUALITY OF LABOUR/SUPERVISORY STAFF, DILIGENCE OF MANAGEMENT ETC. ACCORDINGLY, IN THE SAID CASE, THE HON'BLE ITAT HELD THAT THE AO'S ACTION IN ESTIMATING THE PRODUCTION OF THE ASSESSEE COMPANY ON THE BASIS OF ALLEG ED EXCESSIVE CONSUMPTION OF ELECTRICITY IS ERRONEOUS AND FALLACIOUS. IT IS SEEN THAT A SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE AHMEDABAD BENCH OF THE ITAT IN THE CASE OF EASTERN ENTERPRISES VS. ACIT (ITA NO.352/AHD/2010 DATED 15 - 6 - 2012) ALSO, WHEREIN TH EY OPINED THAT THE CONSUMPTION OF ELECTRICITY MAY RISE DUE TO HUNDREDS OF FACTORS AND THEREFORE, NO ADDITION IS JUSTIFIED. 06.4 IT IS CLEAR THAT IN THE PRESENT CASE, APART FROM ESTIMATING PRODUCTION ON THE BASIS OF EXCESSIVE CONSUMPTION OF ELECTRICITY, D ETERMINED ON COMPARISON WITH THE CONSUMPTION FIGURES OF A LARGE PUBLIC SECTOR UNDERTAKING, THE ASSESSING OFFICER HAS NOT BEEN ABLE TO BRING ON RECORD ANY OTHER EVIDENCE TO SUPPORT HIS CONCLUSION REGARDING UNACCOUNTED PRODUCTION. FOLLOWING THE DECISIONS OF THE HON'BLE ITAT CITED ABOVE AND ALSO THE APPELLATE ORDERS PASSED BY THE CIT(A), GUNTUR AND CIT(A) - I, HYDERABAD ON IDENTICAL FACTS AND CIRCUMSTANCES IN THE APPELLANT'S OWN CASE FOR ASST. YEARS 2001 - 02 TO 2007 - 08 AND ASST.YEAR 2008 - 09, IT IS HELD THAT THERE IS NO JUSTIFIABLE BASIS FOR THE ADDITION ON ACCOUNT OF SUPPRESSED INCOME OF RS.35,97,380/ - IN THE ASST.YEAR 2000 - 01, AND THE SAID ADDITION IS DELETED AND THE GROUND RAISED ON THIS ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 16 - : 1 2 .1. SINCE FACTS ARE SIMILAR AND ACTION OF THE AO IS ALSO SIMILAR , WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) FOR THE DETAILED REASONS STATED ABOVE IN THE ABOVE REVENUE APPEALS. THERE IS NO JUSTIFIABLE BASIS FOR MAKING THE ADDITION AND HENCE, THE SAME WAS COR RECTLY DELETED BY THE LD.CIT(A). IN THE RESULT, THIS APPEAL IS DISMISSED. ITA NO. 27/HYD/2013 : 1 3 . IN THIS CASE ALSO, THE AO CONSIDERED THE EARLIER YEARS ORDERS AS A BASIS AND ARRIVED AT THE SUPPRESSED INCOME AT RS. 40,75,988 / - . LD. CIT(A) VIDE HIS ORDER DT. 25 - 10 - 2012, DELETED THE SAME BY STATING AS UNDER: 06.0 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 TH E 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 O N SO MANY FACTORS, SUCH AS MAINTENANCE OF ELECTRICAL EQU IPMENTS, 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 APPELLANTS 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 APPELLANTS UNIT IS SUBJE CT 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 W AS NO PLACE FOR SUCH ADDITIONS IN SEARCH AND SEIZURE ASSESSMENTS. ACCORDINGLY HE DELETED THE ADDITIONS ON THIS ACCOUNT IN ALL THESE YEARS. 1 4 . AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO UPHOLD THE REVENUES GROUNDS. FOR THE D ETAILED REASONS M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 17 - : GIVEN ABOVE, WE AGREE WITH THE ORDER OF THE CIT(A) THAT THERE IS NO BASIS FOR MAKING ANY ADDITION. ACCORDINGLY, THE GROUNDS ARE REJECTED. IN THE RESULT, THIS APPEAL REVENUE IS DISMISSED. 1 5 . ONE CONTENTION OF THE LD. COUNSEL IN ALL THE R EVENUE APPEALS IS THAT THE ADDITIONS CANNOT BE MADE IN THE PROCEEDINGS U/S. 153A WHEN THERE IS NO INCRIMINATING MATERIAL. HE RELIED ON THE SPECIAL BENCH DECISION OF ALL CARGO GLOBAL LOGISTICS LTD., VS. DCIT [137 ITD 287 (SB)] (SUPRA) AND ALSO CO - ORDINATE BENCH AT BOMBAY IN THE CASE OF ACIT VS. JAYENDRA P. JHAVERI [65 SOT 118] (MUMBAI) (URO) (SUPRA). HOWEVER, IN VIEW OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF GOPAL LAL BHADRUKA VS. DCIT [346 ITR 106] (AP) (SUPRA) , WE ARE OF THE OPINION THAT A O CAN TAKE INTO CONSIDERATION THE MATERIAL OTHER THAN THAT AVAILABLE DURING THE SEARCH AND SEIZURE OPERATIONS , FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF ASSESSEE. ON LEGAL PRINCIPLES OF ABATEMENT OF ASSESSMENTS IN SOME YEARS, EVEN THOUGH THERE IS MERIT IN ASSESSEES CONTENTIONS WITH REFERENCE TO THE PROCEEDINGS U/S. 153A FOR SOME OF THE IMPUGNED ASSESSMENT YEARS, WE FIND NO REASON TO GIVE ANY ADJUDICATION ON THIS ISSUE , AS THE DELETIONS MADE BY THE CIT(A) ON MERITS WERE UPHELD , AS THERE IS NO M ATERIAL AT ALL TO MAKE THE ADDITIONS. IN VIEW OF THE CONFIRMATION OF THE CIT(A)S ORDER IN THE ABOVE APPEALS, THERE IS NO NEED TO ADJUDICATE THE LEGAL GROUNDS RAISED BY ASSESSEE WHICH ARE I N SUPPORT OF THE CIT(A)S ORDER FOR ACADEMIC REASONS. M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., ASSESSEES APPEAL IN ITA NO. 1555/HYD/2011: 1 6 . THIS APPEAL IS BY ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) - I, HYDERABAD , DT. 26 - 07 - 2011. AS CAN BE SEEN FROM THE ABOVE M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 18 - : APPEALS OF REVENUE, THREE DIFFERENT CIT(A)S HAVE UPH ELD ASSESSEES CONTENTIONS AND DELETED ADDITION S , WHEREAS IN THIS ASSESSMENT YEAR, LD. CIT(A) CONFIRMED THE ADDIT ION SO MADE BY STATING THE FOLLOWING REASONS: 04.0 I HAVE GONE THROUGH THE FACT OF THE CASE AND THE SUBMISSION OF THE APPELLANT. THE FIRST EF FECTIVE' GROUND OF APPEAL RELATES TO THE DETERMINATION OF SUPPRESSED INCOME. I FIND FROM THE ASSESSMENT ORDER THAT THE AO HAS ANALYZED THE PATTERN OF POWER CONSUMPTION IN VARIOUS ASSESSMENT YEARS AND IT WAS FOUND THAT THE POWER CONSUMPTION WAS AS LOW AS 12 60 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 ADO PTED 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 TH E 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 FORFEITED. THE FIGURES REPRODUCED BY THE AO SHOWS THAT THE APPELLANT WAS IN THE HABIT OF RECEIVING CASH IN THE RANGE OF RS.20 TO 55 LAKHS ON EACH OCCASION AND LATER ON SHOWING THEM AS ADVANCE FORFEITED. THE APPELLANT CONTE NDS THAT THE SAID ADVANCES WERE FORFEITED SINCE THE BUYERS DID NOT TURN UP TO LIFT THEIR MATERIAL INTENDED TO BE PURCHASED. IN MY VIEW, THE EXPLANATION GIVEN BY THE APPELLANT IS INCONCEIVABLE AND UNBELIEVABLE. NO PRUDENT PERSON AFTER PAYING HUGE ADVANCE TO THE TUNE OF RS.20 TO 55 LAKHS WOULD ALLOW IT TO BE FORFEITED. I THEREFORE AGREE WITH THE STAND OF THE ASSESSING OFFICER THAT THE ADVANCE FORFEITED WAS NOTHING BUT A CAMOUFLAGED ACCOUNTING ENTRY TO BRING IN THE UNACCOUNTED TRADING RECEIPTS INTO THE BOOKS F OR REGULARISATION. THE APPELLANT IN HIS SUBMISSION BEFORE THE AO HAD ALSO EXPLAINED THE SAME TO BE SALE RECEIPTS NOT MATERIALIZED. TAKING A CUE FROM THE ADVANCE FORFEITED THE AO HAD PROCEEDED TO CONCLUDE THAT THE TRADING RECEIPT HAS RESULTED FROM SALE OF S UPPRESSED PRODUCTION BROUGHT INTO THE BOOKS. HAD THE ADVANCE RECEIVED BY THE APPELLANT BEING GENUINE, THE APPELLANT WOULD HAVE PRODUCED THE DETAILS OF THE PAYERS FOR FURTHER VERIFICATION. THE APPELLANT FAILED TO DO SO. THEREFORE, I HOLD THAT M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 19 - : THERE WAS NO I NFIRMITY ON THE PART OF THE AO IN COMPUTING THE SUPPRESSED PRODUCTION WHICH IS FORTIFIED FROM THE ACCOUNTING ENTRIES IN THE APPELLANT'S BOOKS AS OTHER INCOME BEING ADVANCE FORFEITED. THE AO HAS SCIENTIFICALLY WORKED OUT THE SUPPRESSED PRODUCTION AND THE SU PPRESSED INCOME THEREFROM. IN FACT THE AO HAS ALSO GIVEN CREDIT FOR THE CONSUMPTION OF RAW MATERIAL THAT WOULD HAVE GONE INTO THE SUPPRESSED PRODUCTION. HE HAS ALSO GIVEN CREDIT FOR EXPENDITURE OF RS.12 LAKHS WHICH IN VIEW IS QUITE REASONABLE SINCE THE USU AL EXPENDITURE HAS ALREADY BEEN BOOKED BY THE APPELLANT AND DEBITED TO P&L A/C. EVEN THE BURNING LOSS AT 10% ALLOWED BY THE AO IS REASONABLE. IN FACT, IN THE CASE OF SRJ PEETY STEELS WHICH IS RELIED ON BY THE APPELLANT, IT IS FOUND THAT THE BURNING LOSS RE PORTED IN THAT CASE WAS AS LOW AS 1.73% TO 2.46%. ACCORDINGLY, THE BURNING LOSS OF 10% AS ALLOWED BY THE AO IS DEFINITELY REASONABLE AND NO INTERFERENCE IS CALLED FOR. 04.1 THE APPELLANT HAS ALSO RELIED ON THE DECISIONS IN THE CASE OF ROYAL MARWAR TOBAC CO PRODUCTS AND IN THE CASE OF SRJ PEETY STEELS REFERRED TO ABOVE. IN MY VIEW THE CASE LAWS ARE DISTINGUISHABLE SINCE THE MAIN ISSUE IN THOSE CASES WAS WHETHER THE ASSESSMENT U/S 153A CAN BE COMPLETED WITHOUT ANY INCRIMINATING MATERIAL ON HAND. THE ASSESSM ENT 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 ALS O 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 O F 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 OU T THE SUPPRESSED INCOME. IN VIEW THEREOF, I HOLD THAT THE EXPENDITURE ALLOWED BY THE AO IS REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 20 - : 1 7 . THIS ASSESSMENT IS OUTSIDE THE SEARCH PERIOD. AO HAS TAKEN UP THE SCRUTINY U/S. 143(3). HOWEVER, INSTEAD OF EXAMINING THE BOOKS OF ACCOUNTS OF THIS YEAR , AS SEEN FROM THE ASSESSMENT ORDER, AO LISTED OUT THE SO CALLED SEIZED MATERIAL, SHOW CAUSE NOTICE S ISSUED BY THE CENTRAL EXCISE AUTHORITIES AND THE AMOUNTS OFFERED AS INCOMES UPTO AY. 2007 - 08 BY WAY OF FORFE ITURE OF ADVANCES IN THE ORDER AND ON SIMILAR LINES ARRIVED AT THE SUPPRESSED INCOME AT RS. 2,16,11, 739/ - . LD. CIT(A) AS SEEN FROM THE ABOVE ORDER, UPHELD THE CONTENTIONS OF THE AO FOR THE REASONS STATED BY HIM. HOWEVER, HE HAS DIRECTED THE AO TO GIVE CR EDIT TO THE OTHER INCOME ADMITTED BY ASSESSEE IN THE BOOKS OF ACCOUNTS. 1 8 . AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO UPHOLD THE ORDER OF THE CIT(A) AND AO ON THE ISSUE. AS IN ALL THE YEARS DECIDED ABOVE, THE ADDITION IS MADE ON THE BASIS OF THE PRESUMPTIONS AND SURMISES , WITHOUT THERE BEING ANY EVIDENCE LEAVE ALONE ANY INCRIMINATING MATERIAL. ORDER CANNOT BE UPHELD WHICH WAS BASED ON PRESUMPTIONS AND SURMISES. ASSESSEE S OBJECTIONS WITH REFERENCE TO BOOKS OF ACCOUNTS HAVE N OT BEEN REJECTED; T HE RE IS NO INCRIMINATING MATERIAL; T HE REPORT OF SPONGE IRON INDIA LTD., CANNOT BE TAKEN AS BASIS H AS TO BE UPHELD AS VALID . SINCE THE ASSESSMENT IS NOT U/S. 153A, THE LEGAL OBJECTIONS RAISED BY ASSESSEE ARE NOT APPLICABLE TO THE IMPUG NED ASSESSMENT YEAR. BUT THERE IS NO EVIDENCE AT ALL WITH AO AND ALL OTHER AUTHORITIES LIKE CENTRAL EXCISE AND SALES TAX AUTHORITIES HAVE NOT MADE OUT ANY CASE OF SURPLUS PRODUCTION OR SUPPRESSED SALES. IN THE ABSENCE OF ANY EVIDENCE ON RECORD, AOS ACT ION CANNOT BE UPHELD. THERE ARE NO JUSTIFIABLE REASONS FOR MAKING THE ADDITION. THEREFORE, ASSESSEES GROUNDS ARE CONSIDERED ALLOWED AND M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., M/S. BALAJI STEEL ROLLING INDUSTRIES : - 21 - : ADDITIONS SO MADE BY THE AO STANDS DELETED. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 19 . TO SUM - UP, ALL THE REV ENUE APPEALS ARE DISMISSED AND ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRU ARY , 201 6 SD/ - SD/ - (S.S. VISWANETHRA RAVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH FEBRUARY, 2016 TNMM COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 6, 7 TH FLOOR, AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBAGH, HYDERABAD. 2 . M/S. BALAJI STEEL ROLLING MILLS PVT. LTD., 22 - 5 - 232/33, KALLI KAMAAN, H YDERABAD. C/O. M/S. R.B. KABRA & CO., CHARTERED ACCOUNTANT, 1 - 917, TILAK ROAD, HYDERABAD. 3. M/S. BALAJI STEEL ROLLING INDUSTRIES , 22 - 5 - 232/33, KALLI KAMAAN, HYDERABAD. 4 . CIT(A), GUNTUR 5 . CIT(A) - I, HYDERABAD 6 . CIT (CENTRAL), HYDERABAD. 7 . D.R . ITAT, HYDERABAD. 8 . GUARD FILE.