Gladder Ceramics Limited, Sabarkantha V. The ACIT.,S.K.Circle, Himatnagar

ITA 2568/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85622 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Principle of natural justice
• Section: 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI, ACCOUNTANT MEMBER. ITA. NOS. 1277 TO 1280/AHD/2012 (ASSESSMENT YEARS:2005-06, 06-07, 07-08 & 08-09) THE ASSTT. COMMISSIONER OF INCOME-TAX SABARKANTHA CIRCLE, HIMATNAGAR APPELLANT VS. SANTRO TILES LIMITED, AT & POST DALPUR, TAL: PRANTIJ-383205 DIST: SABARKANTHA RESPONDENT PAN: AAHCS3818C & I.T.A. NOS. 1287 TO 1290/AHD/2012 (ASSESSMENT YEARS:2005-06, 06-07, 07-08 & 08-09) SANTRO TILES LIMITED, AT & POST DALPUR, TAL: PRANTIJ-383205 DIST: SABARKANTHA APPELLANT VS. THE DCIT, SABARKANTHA CIRCLE, HIMATNAGAR RESPONDEN T I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 2 & I.T.A. NOS. 2568 & 2569/AHD/2012 (ASSESSMENT YEARS:2005-06 & 2006-07) GLADDER CERAMICS LTD. CERAMICS ZONE, AT. & PO. DALPUR, TA. PRANTIJ, DIST. SABARKANTHA AP PELLANT VS. THE ASSTT. COMMISSIONER OF INCOME-TAX SABARKANTHA CIRCLE, HIMATNAGAR RES PONDENT PAN: AABCG7607D & I.T.A. NOS. 2611 & 2612/AHD/2012 (ASSESSMENT YEARS:2005-06 & 06-07) THE ASSTT. COMMISSIONER OF INCOME-TAX SABARKANTHA CIRCLE, HIMATNAGAR APPELLANT VS. GLADDER CERAMICS LTD. CERAMICS ZONE, AT. & PO. DALPUR, TA. PRANTIJ, DIST. SABARKANTHA RESPO NDENT I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 3 & I.T.A. NOS. 2805 & 2806/AHD/2012 (ASSESSMENT YEARS:2005-06 & 2006-07) THE INCOME-TAX OFFICER SABARKANTHA WARD-1, HIMATNAGAR APPELLANT VS. SANYO CERA TILES PVT. LTD. OPP: SAHAKARI GIN, HIMATNAGAR, DIST: SABARKANTHA-383001 RESPONDENT PAN: AAGCS1256D & I.T.A. NOS. 130 & 131/AHD/2013 (ASSESSMENT YEARS:2005-06, 06-07) SANYO CERA TILES PVT. LTD. OPP: SAHAKARI GIN, N. H. NO. 8, KANKROL, TA. HIMATNAGAR, 383001 APPELLANT VS. THE INCOME-TAX OFFICER ACIT, WARD-1, SABARKANTHA HIMATNAGAR RESPONDENT / BY REVENUE :SHRI DINESH SINGH, SR. DR / BY ASSESSEE :SHRI TUSHAR P. HEMANI, AR /DATE OF HEARING :21.01.2015 !'# /DATE OF PRONOUNCEMENT : 23 .01.2015 I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 4 ORDER PER BENCH ALL THESE EIGHT SET OF CROSS APPEALS, 8 APPEALS BY THREE DIFFERENT ASSESSEES AND 8 APPEALS BY REVENUE ARE AR ISING OUT FORM THE CONSOLIDATED ORDERS OF CIT(A)-VII, AHMEDAB AD, DATED 29.03.2012 FOR A.Y. 2005-06, 06-07, 07-08 & 08-09 I N CASE OF SANTRO TILES LTD. & CIT (A)-VIII, AHMEDABAD, DATED 30.08.2012 FOR A.Y. 2005-06 & 06-07 IN CASE OF GLADDER CERAMIC S LTD. AND CIT(A)-VIII, AHMEDABAD, DATED 28.09.2012 FOR A.Y. 2 005-06 & 06-07 IN CASE OF SANYO CERA TILES PVT. LTD. SO, TH EY ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE. 2. IN ITA NO. 1277/AHD/2012 FOR A.Y. 2005-06, REVEN UE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION ON ACCOUNT OF SUPPRESSION OF SALE PRICE OF RS.49,12,473/- WITHOUT APPRECIATING FACT THAT THE ASSESSEE ESTABLISHED SYNDICATE WITH THE NETWORK OF DEDICATED TRANSPORTERS AND DEALERS TO CAMOUFLAGE PA RT OF THEIR UNDERVALUATION. 2.1 IN I.T.A. NO. 1287/AHD/2012 FOR A.Y. 2005-06, A SSESSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN DISMISSING THE APPELLANT'S GRO UND OF APPEAL CHALLENGING THE VALIDITY OF THE NOTICE IS SUED U/S. 148 OF THE ACT AS REGARDS RE-OPENING THE I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 5 ASSESSMENT. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE NOTICE ISSUED U/S. 148 OF THE ACT AND THE CONSEQUENTIAL RE-ASSESSMENT PROCEEDINGS ARE INVALID . THE SAME BE HELD SO NOW. 2. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN DISMISSING THE APPELLANT'S GRO UND OF APPEAL CHALLENGING THE REJECTION OF BOOKS OF ACC OUNTS U/S. 145 OF THE INCOME-TAX ACT, 1961. ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CI T(A) OUGHT TO HAVE HELD THAT THE ACTION OF A.O. IN REJEC TING THE BOOKS OF ACCOUNTS IS NOT TENABLE IN THE EYES OF LAW. THE SAME BE HELD SO NOW. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE IN CONFIRMING THE SUPPRESSION OF SALES OF RS. 1,98,16,350/- IN THE HANDS OF THE APPELLANT. NO SUC H SALES HAVE BEEN SUPPRESSED AS ALLEGED OR FOR THE REASONS AS ALLEGED. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF NET PROFITS @ 15.21 ON THE FIGURE OF SUPPRESSION OF SALES OF RS. 1,98,16,350/- SO ESTIMATED IN THE HANDS OF THE APPELLANT. THE APPELLANT HAS EARNED NO SUCH NET PRO FIT. 5. ALTERNATIVELY AND WITHOUT PREJUDICE, THE RATE O F NET PROFITS IS HIGHLY EXAGGERATED AND EXCESSIVE. 6. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDE RS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THE Y FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIO NS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 6 7. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234A/B/C OF THE ACT. 8. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN INITIATI NG PENALTY U/S 271(L)(C) OF THE ACT. 3. ASSESSING OFFICER IN REASSESSMENT ORDER U/S. 147 NOTED THAT UNACCOUNTED PORTION OF SALE PRICE WHICH WAS CO LLECTED BY COMPANY IN CASH FROM VARIOUS DEALERS/DISTRIBUTORS A S MENTIONED IN THE ASSESSMENT ORDER AND ADMITTED BY D IRECTOR AS WELL COMPANY HAS NOT SHOWN FULL AMOUNT OF SALES IN REGULAR BOOKS OF ACCOUNT FOR A.Y. 2005-06, 06-07 & 07-08. THE ISSUE OF REOPENING WAS AGITATED BEFORE CIT(A) WHO HAS DIS MISSED THE SAME WHICH HAS BEEN CHALLENGED BY ASSESSEE IN ITS A PPEAL AS MENTIONED ABOVE. 3.1 COMING TO THE MERIT, FIRST ISSUE IS WITH REGARD S TO REJECTION OF BOOKS OF ACCOUNT U/S. 145 OF THE ACT. THE FINDI NG OF ASSESSING OFFICER IN THIS REGARD IS AS UNDER: IN VIEW OF THE STATEMENT MADE BY THE DIRECTOR OF T HE COMPANY BEFORE THE DGCEI AND THE CATEGORICAL FINDIN G ARRIVED AT IN THE ABOVE DISCUSSION, IF IS CLEAR THA T THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE, DO NOT SHOW THE CORRECT PROFITS OF BUSINESS AND HENCE ARE REJECTED U/S. 145. 3.2 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN REJECTION OF BOOKS OF ACCOUNT U/S. 145 WAS UPHELD BY OBSERVING AS UNDER: I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 7 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND THE SUBMISSION OF LD. AR AND DONT AGREE WITH THE SUBMISSION MADE BY THE LD. AR, THE STATEMENTS O F SHRI PRAKASHBHAI DAHYABHAI PATEL, DIRECTOR OF THE ASSESSEE COMPANY RECORDED U/S.14 OF THE CENTRAL EXC ISES ACT 1944 BEFORE THE SUPERINTENDENT, DGCEI ZONAL UNI T AHMEDABAD ON 06/09/2008, 30/06/2009 AND 02/07/2009 AND HE ADMITTED THAT HE RECEIVED RS.15 T O 20 PER BOX. HE HAS FURTHER ACCEPTED THAT THE DUE TO M ARKET COMPULSION AND GENERAL TRADE PRACTICE, THEY HAD BEE N SUPPRESSING THE MRP AND PAYING LESS CENTRAL EXCISE DUTY, CONSIDERING THE ABOVE FACT ASSESSEE HAS NOT SHOWN R EAL PROFIT IN HIS BOOKS OF ACCOUNTS, THEREFORE, AO HAS RIGHTLY TO REJECTED BOOKS OF ACCOUNTS. SECONDLY, THE CASE LAWS CITED (SUPRA) BY THE APPELLANT IS NOT AT ALL APPLIC ABLE TO THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. IN VI EW OF THE ABOVE DISCUSSION AND THE FACTS OF THE CASE, I U PHOLD ACTION TAKEN BY AO BY REJECTING THE BOOKS OF ACCOUN TS U/S 145 OF THE IT ACT 1961. THE GROUNDS OF APPEAL TAKE N BY THE APPELLANT ARE REJECTED. 3.3 ON MERIT, THE ADDITIONS WERE MADE ON ACCOUNT OF INCOME EARNED ON ACCOUNT OF SUPPRESSION OF MRP. THE FINDI NG OF ASSESSING OFFICER IN THIS REGARD IS AS UNDER: I. ASSESSEE'S REPLY IS CONSIDERED AND SEEMS ACCEPT ABLE BECAUSE THE SAME ISSUE HAS ALREADY BEEN DISCUSSED I N DETAIL IN THE CASE OF ASIAN GRANITO INDIA LTD. FOR THE BLO CK PERIOD AND IN THAT CASE THE DEPARTMENT HAS TAXED CONCEALED INCOME WHICH WAS WORKED OUT ON THE GP BASIS ON SUPPRESSION OF MRP. BECAUSE FACTS OF THE PRESENT CA SE ARE ALSO SIMILAR IT IS CONSIDERED JUSTIFIABLE TO FOLLOW THE DEPARTMENT'S LINE OF ACTION AS ADOPTED IN THE CASE OF ASIAN GROUP OF CASES DURING THE COURSE OF THEIR BLOCK ASS ESSMENT PROCEEDINGS BEFORE INVESTIGATION WING, ADLT(LNV), AHMEDABAD). I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 8 II. IN VIEW OF THE STATEMENT MADE BY THE DIRECTOR O F THE COMPANY BEFORE THE DGCEI AND THE CATEGORICAL FINDIN GS ARRIVED AT IN THE ABOVE DISCUSSION, IT IS CLEAR THA T THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE, DO NOT SHOW THE C ORRECT PROFITS OF BUSINESS AND HENCE ARE REJECTED U/S 145. WHILE IN RESPECT OF THE TURNOVER SHOWN IN THE BOOKS, THE PRO FIT SHOWN IN THE BOOKS IS RETAINED THERE BEING NO EVIDENCE OF FICTITIOUS EXPENDITURE SHOWN IN THE BOOKS, THE PROFIT IN RESPE CT OF THE UNACCOUNTED RECEIPTS OF THE ASSESSEE NEED TO BE RAT IONALLY ESTIMATED SO AS TO ARRIVE AT THE TOTAL PROFITS OF T HE BUSINESS OF THE ASSESSEE. THE DGCEI HAS MADE VERY RELEVANT OBSERVATION IN PARA NO.29.3 PAGE 177 OF THE SHOW CA USE NOTICE ISSUED TO THE ASSESSEE. AFTER THE DETAILED E NQUIRY AND EXAMINATION OF THE VARIOUS AGENCIES INVOLVED IN CER AMIC TILES INDUSTRIES, THEY HAVE COME TO THE CONCLUSION THAT A SSESSEE ESTABLISHED A SYNDICATE WITH THE NETWORK OF DEDICAT ED TRANSPORTERS AND DEALERS TO CAMOUFLAGE PART OF THEI R UNDERVALUATION. INVESTIGATION FURTHER REVEALED THAT THE DEALERS WERE ALSO NOT DECLARING VARIOUS INCIDENTAL AND ANCILLARY EXPENSES AS THE SAME WERE MET WITH FROM T HE CASH AMOUNT COLLECTED BY THE DEALERS FROM THEIR BUYERS O VER AND ABOVE THE VALUE DECLARED IN THE SALE BILLS. THE TIL E MANUFACTURERS WERE PURCHASING RAW MATERIALS EITHER WITHOUT BILL OR AT REDUCED RATES. THIS WAS DONE PAR TICULARLY SO AS TO KEEP MANUFACTURING COSTS ON PAPER AT LOWER SIDE SO AS TO MATCH THE DEFLATED MRP. IT HAS ALSO BEEN CATE GORICALLY STATED THAT THE TILE MANUFACTURERS WERE OBTAINING F REIGHT AND TRANSPORT BILLS AT A LOWER RATE AND THE DIFFERE NTIAL AMOUNT PAYABLE TO THE SUPPLIER OF RAW MATERIALS AND TRANSPORTERS WERE PAID OUT OF THE CASH SO COLLECTED FROM THE DEALERS/DISTRIBUTORS. IT IS THEREFORE VERY APPARENT THAT EVEN THE DGCEI HAS ACCEPTED & ACKNOWLEDGED THE FACT THAT NOT ONLY MRP IS BEING REDUCED FOR THE PURPOSE OF ALLEGE D EXCISE DUTY BUT ALSO COMPLETE EXPENSES/COSTS WITH REFERENC E TO THE PURCHASE OF RAW MATERIAL AND OTHER INCIDENTAL MANUFACTURING EXPENSES HAVE BEEN CORRESPONDINGLY SH OWN AT A LESSER AMOUNT. THIS ONLY GOES TO SHOW THAT IT IS NOT A CASE WHERE THE ENTIRE EXPENSES HAVE BEEN RECORDED I N THE BOOKS OF ACCOUNTS AND THE ALLEGED SUPPRESSION OF SA LES IS NOT ACCOUNTED FOR THEREBY RESULTING IN THE ENTIRE A LLEGED I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 9 SUPPRESSION OF RECEIPTS AS INCOME. PART OF THE ALLE GED SUPPRESSION OF RECEIPTS HAVE BEEN USED FOR THE PURP OSE OF MAKING CASH PAYMENTS FOR THE VARIOUS EXPENSES ASSOC IATED WITH THE MANUFACTURING ACTIVITIES. HOWEVER, SINCE SOME OF THE EXPENSES RELATABLE TO TH E UNACCOUNTED RECEIPTS ARE ACCOUNTED IN REGULAR BOOKS AND SOME ARE NOT, THE GP TO BE ADOPTED FOR THE PURPOSE OF COMPUTING PROFITS ON THE UNACCOUNTED RECEIPTS NEEDS TO BE SUITABLY ADJUSTED. THEREFORE, GP ONLY ON UNACCOUNTE D CASH RECEIVED AT THE RATE OF 22.40% TOTALING RS.45,12,40 6/- CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE AS CON CEALED INCOME. IT IS A CASE WHERE MAJORITY OF RAW MATERIAL AND OTHER MANUFACTURING EXPENSES ACCOUNTING FOR 60-65% OF MANUFACTURING COST AND ARE RECORDED IN BOOKS. THE G P RATE, TO BE ADOPTED FOR COMPUTING PROFITS GENERATED TO TH E ASSESSEE COMPANY OUT OF ITS UNACCOUNTED RECEIPTS, H AS TO BE HIGHER THAN THE NORMAL GP IN LIGHT OF THE FACTS THA T EXPENSES LIKE A PORTION OF THE RAW MATERIAL COST, E NTIRE ELECTRICITY AND FUEL COSTS AND A PORTION OF THE LAB OUR COSTS HAVE ALREADY BEEN CLAIMED IN THE NORMAL BOOKS OF AC COUNTS. SINCE THERE IS NO FIRM BASIS FOR ARRIVING AT A PROP ER ASCERTAINMENT OF SUCH GP IN LIGHT OF THE FACT THAT THE ASSESSEE IS UNABLE TO FURNISH DETAILS OF ALL UNACCO UNTED EXPENSES INCURRED BY IT, ALTHOUGH EVIDENCE OF SUCH EXPENSES HAS BEEN NOTED BY THE DGCEI IN THEIR REPORT, A RAT IONALE ESTIMATE IS MADE IN RELATION TO THE GP TO BE ADOPTE D IN RESPECT OF THE UNACCOUNTED RECEIPTS OF THE ASSESSEE . CONSIDERING THE TOTALITY OF THE FACTS, GP RATE OF 4 0% SEEMS REASONABLE IN THIS CASE AND ACCORDINGLY THE SAME IS APPLIED ON UNACCOUNTED CASH RECEIVED RS.2,01,44,670/- AND RS.80,57,868/- IS TAXED AS UNACCOUNTED INCOME EARNE D ON ACCOUNT OF SUPPRESSION OF MRP. III. THE ASSESSMENT IS BEING FRAMED TAKING INTO CONSIDERATION THE ASSESSMENT MADE IN THE CASE OF AS IAN GRANITO INDIA LTD ON 31/12/2009 FOR THE BLOCK ASSES SMENT PERIOD BY THE CENTRAL RANGE-2, AHMEDABAD IN WHICH T HE SAME FACTS WERE CONSIDERED. IN THAT CASE ALSO, ASSE SSEE WAS INDULGING IN SUPPRESSION OF MRP AND FACTS WERE PROV IDED I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 10 REGARDING THIS SUPPRESSION BY DGCEI ALONG WITH SANT RO TILES LTD., THE ASSESSEE. HOWEVER, IN VIEW OF THE F ACT THAT NOT ALL MANUFACTURING EXPENSES HAVE BEEN INCURRED OUT O F BOOKS AND SOME EXPENSES RELATING TO THE EXTRA RECEIPTS HA VE BEEN CLAIMED IN THE REGULAR BOOKS, THE GP OF THE UNACCOU NTED RECEIPTS HAVE BEEN ENHANCED IN THIS CASE TO TAKE IN TO ACCOUNT ANY SUCH CLAIM. THAT THE AO HAS WORKED UNACCOUNTED INCOME ON SUPPRESSION OF MRP AND ADOPTED GP FOR AFORESAID FOU R YEAR AS UNDER:- ASST. YEAR SUPPRESSED TURN OVER ADOPTED GP ADDITION 2005-06 19816350 40% 7926540 2006-07 24837300 40% 9934920 2007-08 20144670 40% 8057868 2008-09 24609720 40% 9843888 4. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY, WHEREIN CIT(A) OBSERVED THAT ASSESSING OFFICER HAD ADOPTED @ 40% ON SUPPRESSION OF SALE IN THE ASSESSMENT ORDER. ASSESSING OFFICER HAS HIMSELF NOTED IN ASSESSMENT O RDER VIDE PAGE NO.24 OF ASSESSMENT ORDER IS AS UNDER: 'THE DGCEI HAS MADE VERY RELEVANT OBSERVATION IN PA RA NO.29.3 PAGE 177 OF THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE. AFTER THE DETAILED ENQUIRY AND EXAMINATIO N OF THE VARIOUS AGENCIES INVOLVED IN CERAMIC TILES INDUSTRI ES, THEY HAVE COME TO THE CONCLUSION THAT ASSESSEE ESTABLISH ED A SYNDICATE WITH THE NETWORK OF DEDICATED TRANSPORTER S AND DEALERS TO CAMOUFLAGE PART OF THEIR UNDERVALUATION. INVESTIGATION FURTHER REVEALED THAT THE DEALERS WER E ALSO NOT DECLARING VARIOUS INCIDENTAL AND ANCILLARY EXPENSES AS THE SAME WERE MET WITH FROM THE CASH AMOUNT COLLECTED B Y THE DEALERS FROM THEIR BUYERS OVER AND ABOVE THE VALUE DECLARED IN THE SALE BILLS. THE TILE MANUFACTURERS WERE PURC HASING I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 11 RAW MATERIALS EITHER WITHOUT BILL OR AT REDUCED RAT ES. THIS WAS DONE PARTICULARLY SO AS TO KEEP MANUFACTURING C OSTS ON PAPER AT LOWER SIDE SO AS TO MATCH THE DEFLATED MRP . IT HAS ALSO BEEN CATEGORICALLY STATED THAT THE TILE MANUFA CTURERS WERE OBTAINING FREIGHT AND TRANSPORT BILLS AT A LOW ER RATE AND THE DIFFERENTIAL AMOUNT PAYABLE TO THE SUPPLIER OF RAW MATERIALS AND TRANSPORTERS WERE PAID OUT OF THE CAS H SO COLLECTED FROM THE DEALERS/DISTRIBUTORS. IT IS THER EFORE VERY APPARENT THAT EVEN THE DGCEI HAS ACCEPTED & ACKNOWLEDGED THE FACT THAT NOT ONLY MRP IS BEING RE DUCED FOR THE PURPOSE OF ALLEGED EXCISE DUTY BUT ALSO COM PLETE EXPENSES/COSTS WITH REFERENCE TO THE PURCHASE OF RA W MATERIAL AND OTHER INCIDENTAL MANUFACTURING EXPENSE S HAVE BEEN CORRESPONDINGLY SHOWN AT A LESSER AMOUNT. THIS ONLY GOES TO SHOW THAT IT IS NOT A CASE WHERE THE ENTIRE EXPENSES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS AND THE ALLEGED SUPPRESSION OF SALES IS NOT ACCOUNTED FOR THEREBY R ESULTING IN THE ENTIRE ALLEGED SUPPRESSION OF RECEIPTS AS IN COME. PART OF THE ALLEGED SUPPRESSION OF RECEIPTS HAVE BEEN US ED FOR THE PURPOSE OF MAKING CASH PAYMENTS FOR THE VARIOUS EXP ENSES ASSOCIATED WITH THE MANUFACTURING ACTIVITIES. HOWEV ER, SINCE SOME OF THE EXPENSES RELATABLE TO THE UNACCOUNTED R ECEIPTS ARE ACCOUNTED IN REGULAR BOOKS AND SOME ARE NOT, TH E GP TO BE ADOPTED FOR THE PURPOSE OF COMPUTING PROFITS ON THE UNACCOUNTED RECEIPTS NEEDS TO BE SUITABLY ADJUSTED. THEREFORE, GP ONLY ON UNACCOUNTED CASH RECEIVED AT THE RATE OF 22.40% TOTALING RS.45,12,406/- CANNOT BE TAXED I N THE HANDS OF THE ASSESSEE AS CONCEALED INCOME. IT IS A CASE WHERE MAJORITY OF RAW MATERIAL AND OTHER MANUFACTUR ING EXPENSES ACCOUNTING FOR 60-65% OF MANUFACTURING COS T AND ARE RECORDED IN BOOKS. THE GP RATE, TO BE ADOPTED F OR COMPUTING PROFITS GENERATED TO THE ASSESSEE COMPANY OUT OF ITS UNACCOUNTED RECEIPTS, HAS TO BE HIGHER THAN THE NORMAL GP IN LIGHT OF THE FACTS THAT EXPENSES LIKE A PORTI ON OF THE RAW MATERIAL COST, ENTIRE ELECTRICITY AND FUEL COST S AND A PORTION OF THE LABOUR COSTS HAVE ALREADY BEEN CLAIM ED IN THE NORMAL BOOKS OF ACCOUNTS. SINCE THERE IS NO FIRM BA SIS FOR ARRIVING AT A PROPER ASCERTAINMENT OF SUCH GP IN LI GHT OF THE FACT THAT THE ASSESSEE IS UNABLE TO FURNISH DETAILS OF ALL UNACCOUNTED EXPENSES INCURRED BY IT, ALTHOUGH EVIDE NCE OF I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 12 SUCH EXPENSES HAS BEEN NOTED BY THE DGCEI IN THEIR REPORT, A RATIONALE ESTIMATE IS MADE IN RELATION TO THE GP TO BE ADOPTED IN RESPECT OF THE UNACCOUNTED RECEIPTS OF T HE ASSESSES. CONSIDERING THE TOTALITY OF THE FACTS, GP RATE OF 40% SEEMS REASONABLE IN THIS CASE AND ACCORDINGLY T HE SAME IS APPLIED ON UNACCOUNTED CASH RECEIVED RS.2,01,44,670/- AND RS.80,57,868/- IS TAXED AS UNACCOUNTED INCOME EARNED ON ACCOUNT OF SUPPRESSION OF MRP. FROM THE ABOVE, CIT(A) OBSERVED THAT ASSESSEE HAS R ESORTED TO LARGE SCALE SUPPRESSION OF SALE THOUGH VARIOUS MODU S OPERANDI. THIS SUPPRESSION WAS ALSO ACCEPTED BY EN GAGED PARTIES. ASSESSING OFFICER ACCEPTED THE CONTENTION THAT THE QUANTUM OF SUPPRESSION OF SALES SHOULD BE BASED ON EX-FACTORY RATE AND HAS ACCORDINGLY MODIFIED THE QUANTUM, DETE RMINED BY DGCEI, ON THE BASIS OF MRP. THE STAND OF ASSESSEE HAS BEEN THAT IT WAS AT BEST PROVISIONAL SINCE THE ISSUES RA ISED BY DIRECTORATE GENERAL OF CENTRAL EXCISE INTELLIGENCE (HEREIN AFTER REFERRED AS DGCEI) WAS NOT FINALLY ADJUDICATED. AS SUCH, FIGURES ADOPTED BY ASSESSING OFFICER ALSO BE SUBJEC TED TO CONSEQUENTIAL MODIFICATION. THE DGCEI HAD OBSERVED THAT RAW MATERIALS WERE PURCHASED WITHOUT BILLS OR AT REDUCE D RATES AND FREIGHT AND TRANSPORT BILLS WERE OBTAINED AT A LOWE R RATE. IN THIS BACKGROUND, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT ADDITION ON ACCOUNT OF SUPPRESSION OF SALES HA S ORIGIN IN INVESTIGATION CONDUCTED BY DIRECTORATE GENERAL OF C ENTRAL EXCISE INTELLIGENCE, AHMEDABAD ZONAL UNIT HAS REVEA LED THAT M/S. SANTRO TILES LIMITED, HIMATNAGAR, MANUFACTURIN G OF I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 13 CERAMICS FLOOR TILES WERE UNDERVALUING THEIR TILES. THEY WERE DECLARING ONLY 70% OF ACTUAL MRP IN THE INVOICE AND COLLECTING THE DIFFERENTIAL AMOUNTS IN CASH. ESTIMATED DUTY E VASION WAS TO THE TUNE OF RS.75 LACS. CASE WAS INVESTIGATED F ROM INCOME TAX POINT OF VIEW BY THE ADIT(INV)-II(2), AHMEDABAD AND TOTAL CONCEALMENT TO THE TUNE OF RS.43,88,57,612/- WAS WO RKED OUT ON THE BASIS OF ANNEXURES D-1, D-1, D-3 AND D-4 TO THE REPORT BY THE DGCEI, AHMEDABAD IN FOUR ASSESSMENT YEARS. STATEMENT RECORDED BY DGCEI, AHMEDABAD, DATED 06.09 .2008 SHRI PRAKASHBHAI DAHYABHAI PATEL, DIRECTOR OF M/S. SANTRO TILES LIMITED HAS STATED THAT DUE TO MARKET COMPULS ION AND GENERAL TRADE PRACTICE, THEY HAD BEEN SUPPRESSING M RP AND PAYING LESS CENTRAL EXCISE DUTY. HE FURTHER STATED THAT THEY HAVE REVISED THEIR MRPS OF ALL THE GRADES OF CERAMI CS FLOOR TILES WITH EFFECT FROM 24.02.2008 AND ONWARDS. FROM THE ABOVE FACTS AS MENTIONED IN SHOW CAUSE NOTICE ISSUE BY DG CEI DATED 04.07.2009 WHICH HAS BEEN DULY SERVED UPON ASSESSEE , IT WAS FOUND CLEAR IN THE EXCISE PROCEEDING THAT SANTRO TI LES LIMITED WAS SUPPRESSING MRP CONTINUES FROM 01.06.2004 TO 31.03.2008 SPREADING OVER FOUR FINANCIAL YEARS I.E. 2004-05 TO 2007-08. UNDER THESE CIRCUMSTANCES, IT WAS FOUND I N THIS CASE AS WELL THAT BY NOT DECLARING SUCH AMOUNT OF UNACCO UNTED SALE PRICE WHICH WAS COLLECTED BY COMPANY IN CASH FROM V ARIOUS DEALERS/DISTRIBUTORS ADMITTED BY THE DIRECTOR AS WE LL COMPANY HAS NOT SHOWN FULL AMOUNT OF SALES IN REGULAR BOOKS OF ACCOUNT. THE SALE PRICE WORTH RS.7,94,25,558/- IN A.Y. 2005- I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 14 06, RS.11,04,17,079/- IN A.Y. 2006-07, RS.10,21,40, 223 IN A.Y. 2007-08 HAVE BEEN UNDER STATED IN TRADING ACCO UNT. THIS HAS RESULTED INTO ESCAPING OF INCOME TO THE EXTENT OF RS.7,94,25,558/-, RS.11,04,17,079/-, RS.10,21,40,22 3/- & RS.14,68,74,752/- FOR A.Y. 2005-06, 06-07, 07-08 & 08-09 RESPECTIVELY. ON THE BASIS OF MATERIAL AVAILABLE O N RECORD REVENUE AUTHORITIES WERE OF THE OPINION AND HAVE RE ASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX OF MORE THAN RS.1 LAC HAS ESCAPED ASSESSMENT FOR THE YEAR UNDER CONSIDERATION DUE TO FAILURE OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FRO ASSESSMENT. THEREFORE, PROCEEDINGS W ERE INITIATED U/S.148 AND CONSEQUENTIAL ADDITIONS WERE MADE. IN SUM AND SUBSTANCE, THE STAND OF LEARNED AUTHORIZED REPRESENTATIVE IS THAT PROCEEDING WHICH INITIATED A T THE STRENGTH OF INVESTIGATION CONDUCTED BY DGCEI, AHMED ABAD ARE BASIS FOR ADDITION IN INCOME TAX PROCEEDING AS WELL . IT WAS SUBMITTED THAT PROCEEDING WITH REGARDS TO EVASION O F EXERCISE WAS PENDING BEFORE CONCERN TRIBUNAL AND WHICH WILL HAVE BEARING ON THE ISSUE AT HAND. SO, IN THE INTEREST OF JUSTICE, MATTER SHOULD BE RESTORED TO CIT(A) WITH DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW IN LIGHT OF FINAL OUTCOME IN THE EXCISE PROCEEDING AS DISCUSSED ABOVE. FINDING FORCE IN TH E CONTENTION OF ASSESSEE, WE SET ASIDE THE ORDER OF CIT(A) AND R ESTORE THE MATTER TO HIM WITH DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW INCLUDING FINAL OUTCOME IN EXCISE CASE, WHICH W AS INITIATED AT THE STRENGTH ON INVESTIGATION BY DGCEI, AHMADABA D AND I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 15 HAS BEARING ON THE ISSUE OF ADDITIONS IN INCOME TAX PROCEEDING AS DISCUSSED ABOVE. SINCE WE ARE RESTORING THE MAT TER TO CIT(A) WITH PRELIMINARY ISSUE AS DISCUSSED ABOVE, S O, WE ARE REFRAINING TO COMMENT ON MERIT OF ISSUE AT HAND. 5. AS A RESULT, APPEAL FILED BY REVENUE AS WELL AS ASSESSEE FOR ARE ALLOWED FOR STATISTICAL PURPOSE AS INDICATE D ABOVE. 6. SIMILAR ISSUES AROSE IN A.YS. 06-07, 07-08 AND 0 8-09 IN CASE OF SANTRO TILES LTD. FACTS BEING SIMILAR SO FO LLOWING THE SAME REASONING, THE ORDER OF CIT(A) IN ALL YEARS IS SET ASIDE WITH SIMILAR DIRECTION. 7. AS A RESULT, APPEALS FILED BY REVENUE AS WELL AS ASSESSEE FOR ALL YEARS ARE ALLOWED FOR STATISTICAL PURPOSE A S INDICATED ABOVE. 8. SIMILAR ISSUE AROSE IN CROSS APPEAL IN CASE OF G LADDER CERAMICS LTD. IN ITA NOS.2568, 2569, 2611 & 2612/AH D/12 FOR A.Y. 2005-06 & 2006-07 & IN CASE OF SANYO CERA TILES PVT. LTD. IN ITA NOS. 2805 & 2806/AHD/12 AND IN ITA NOS. 130 & 131/AHD/13 FOR A.Y. 2005-06 & 2006-07, WHEREIN ADDI TIONS HAVE BEEN MADE ON THE SIMILAR LINE ORIGINATING FROM INVESTIGATION OF DGCEI. SO FOLLOWING THE SAME LOGI C, WE RESTORE THE ISSUE TO CIT(A) WITH DIRECTION TO DECIDE THE SA ME AS PER FACT AND LAW INCLUDING FINAL OUTCOME IN EXCISE CASE, WHI CH WAS INITIATED AT THE STRENGTH ON INVESTIGATION BY DGCEI , AHMADABAD AND FOLLOWED IN INCOME TAX PROCEEDING. A S STATED I.T.A. NOS. 1277 TO 1280 & 1287 TO 1290/AHD/2012 (SANTRO TILES LTD.) FOR A.YS. 05-06, 06-07, 07-08 & 08-09 RESP. ITA NOS. 2468 & 2569 AND 2611 & 2612/AH D/12 (GLADDER CERAMICS LTD.) & ITA NOS. 2805 & 2806/AHD/ 12 & 130 & 131/AHD/12 (SANYO CERA TILES PVT. LTD.) FOR A.Y. 05-06 & 06-07 PAGE 16 ABOVE AS WE ARE RESTORING THE MATTER TO CIT(A) WITH PRELIMINARY ISSUE AS DISCUSSED ABOVE, SO, WE ARE REFRAINING TO COMMENT ON MERIT OF ISSUE AT HAND. 9. AS A RESULT, ALL APPEALS FILED BY REVENUE AS WEL L AS ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE AS IND ICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 23 RD DAY OF JANUARY, 2015. SD/- SD/- (N. S. SAINI) (SHAILENDR A KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMB ER TRUE COPY S.K.SINHA $ $ $ $ &' &' &' &' ('# ('# ('# ('# / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. -- . / CONCERNED CIT 4. .- / CIT (A) 5. '23 &, , / DR, ITAT, AHMEDABAD 6. 367 89 / GUARD FILE. BY ORDER / $ , :/ - , <