Deputy Commissioner of Income tax, Circle-2(1), RAIPUR V. MAHAMAYA STEEL INDUSTRIES LTD, RAIPUR

ITA 5/RPR/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3158 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 10-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Earning of tax free income; Corroborative evidences; Rule 8D
• Section: 145; 132; 143(3); 153A; 14A; 250; 201; 48; 13; 145(3); 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI N. K. CHOUDHRY, JUDICIAL MEMBER ./ I.T.A. NO. 5/RPR/2020) ( ASSESSMENT YEAR : 2016-17) DY. COMMISSIONER OF INCOME TAX -2(1) 1 ST FLOOR, CIVIL LINES, RAIPUR (C.G.) - 492001 / VS. MAHAMAYA STEEL INDUSTRIES LTD. B-8 & 9, SECTOR-C, URLA INDUSTRIAL AREA, SARORA, RAIPUR (C.G.) ./ ./PAN/GIR NO. : AABCR0695Q ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI P. K. MISHRA, CIT.DR / RESPONDENT BY : SHRI VEEKAAS S SHARMA, A.R. DATE OF HEARING 02/08/2021 !'# / DATE OF PRONOUNCEMENT 22/10/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX(APPEALS)-I, RAIPUR (CIT(A) IN SHORT), DATED 2 2.10.2019 ARISING IN THE ASSESSMENT ORDER DATED 27.12.2018 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2016-17. 2. THE GROUNDS OF APPEAL RAISED BY REVENUE READ HER EUNDER: ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 2 - 1. WHETHER ON THE FACTS OF THE CASES AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS,15,94,08,3 94/- MADE BY THE AO AFTER REJECTING THE BOOKS OF ACCOUNT AS PER PROVISION OF SECTION 145(3), BASED ON THE DETAIL REASONS RECORDE D IN THE ASSESSMENT ORDER?' 2. 'WHETHER ON THE FACTS OF THE CASES AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.15,94,08,3 94/- MADE BY THE AO AS THE VARIOUS CASE LAWS CITED BY THE LD.CIT (A) WHICH DO NOT APPLY TO THIS CASE AS EVEN AFTER CONCLUSION OF SEARCH, DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD OFFERED NO SATISFACTORY EXPLANATION ON RECONCILIATION OF THE DISCREPANCIES FOUND AND ON ANALYSIS OF BOOKS OF ACCOUNT AND OTHER DOCUMENTS FU RNISHED?' 3. 'WHETHER ON THE FACTS OF THE CASES AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.15,94,08,3 94/- MADE ON THE BASIS OF ESTIMATION OF INCOME BASED ON AVERAGE YIELD ACROSS THE BUSINESS @ 89%?' 4. 'WHETHER ON THE FACTS OF THE CASES AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCES OF RS.1,09, 83,112/- MADE U/S 14A R.W. RULE 8D, THEREBY IGNORING THE FACT THA T THE ASSESSEE HAS MADE INVESTMENT IN SHARES OUT OF LOAN BORROWING S, AS IT HAS NO OTHER FREE FUND AVAILABLE IN ITS BALANCE SHEET M ORE SO WHEN THE ASSESSEE HAD CLAIMED A HUGE AMOUNT OF INTEREST EXPENSES THEREBY REDUCING ITS NET PROFIT?' 5. 'WHETHER ON THE FACTS OF THE CASES AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCES OF RS. 1,09 ,83,112/- MADE U/S 14A R.W.RULE 8D, IGNORING THE CBDT'S CIRCULAR N O. 14/2006 DATED 28.12.2006?' 3. GROUND NOS. 1 TO 3 CONCERN ADDITION ON ACCOUNT O F LOWER YIELD OF PRODUCTION COMPARED TO INDUSTRIAL AVERAGE. 4. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE M ANUFACTURING OF RE-ROLLED PRODUCTS SUCH AS HEAVY STEEL STRUCTURES, JOIST, INGOTS, GIRDERS ETC. IT HAS TWO DIVISIONS NAMELY FURNACE D IVISION WHICH IS ALSO KNOWN AS STEEL MELTING SHOP (SMS) AND ROLLING MILL DIVISION (RMD). FURNACE/SMS DIVISION USES SPONGE IRON, PIG IRON, SCRAP AND END CUTTING (END CUTTING IS BASICALLY OUTPUT OF RMD ) AS RAW MATERIAL TO MANUFACTURE BILLETS AND BLOOMS AND THE RMD DIVIS IONS USES THESE BILLETS AND BLOOMS AS RAW MATERIAL TO PRODUCE FURTHER RE-ROLLED PRODUCTS SUCH AS HEAVY STEEL STRUCTURAL ETC. ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 3 - 4.1 A SEARCH OPERATION WAS CARRIED OUT IN THE CASE OF ASSESSEE ON 17.10.2011 AT THE MAIN OFFICE AND THE FACTORY PREMI SES OF THE ASSESSEE COMPANY. CONSEQUENTLY, THE ASSESSMENT OF A.Y. 2012-13 AND PRECEDING SIX YEARS WERE SUBJECTED TO SEARCH AS SESSMENT PROCEEDINGS. IN THE SEARCH ASSESSMENT, THE AO REJE CTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALLEGED THAT THE ASSES SEE COMPANY HAS SUPPRESSED ITS YIELD OF SMS/FURNACE DIVISION. THE AO ASSUMED THE AVERAGE YIELD OF THE INDUSTRY AT 89% IN THE SMS/ FU RNACE DIVISION AND CONSEQUENTLY, THE DIFFERENCE BETWEEN ACTUAL YIE LD SHOWN BY THE ASSESSEE VIS--VIS STANDARD YIELD OF 89% ASSUMED BY THE AO WAS TREATED AS UNACCOUNTED PRODUCTION/UNRECORDED SALES IN THOSE YEARS. IN THE FIRST APPEAL AGAINST THE SEARCH ASSESSMENT, THE ADDITIONS ON ACCOUNT OF ALLEGED LOWER YIELD OF PRODUCTION DECLAR ED WAS DELETED AND REVERSED. THE REVENUE PREFERRED APPEAL AGAINST THE AFORESAID FIRST APPELLATE ORDER. HOWEVER, THE CO-ORDINATE BE NCH OF TRIBUNAL ALSO DID NOT SEE ANY MERIT IN SUCH ADDITIONS TOWARD S LOWER YIELD MADE BY AO IN ITA NOS. 232 TO 235/RPR/2014 ORDER DATED 07.11.2019 CONCERNING AYS. 2009-10 TO 2012-13. 4.2 THE PRESENT APPEAL IN QUESTION RELATES TO A.Y. 2016-17 WHICH IS SUBSEQUENT TO THE YEAR COVERED IN THE SEARCH ASS ESSMENT PROCEEDINGS. IT IS NOTICED THAT THE ADDITIONS HAVE BEEN MADE BY THE AO IN THE INSTANT CASE IN THE SAME MANNER BY COMPAR ING YIELD DECLARED BY THE ASSESSEE IN SMS/ FURNACE DIVISION W ITH THE AVERAGE INDUSTRY YIELD OF 89% ASSUMED BY THE AO AND FOR THI S PURPOSE THE AO HAS REFERRED TO THE CONCLUSION DRAWN BY HIS PRED ECESSOR AO IN SEARCH ASSESSMENT COMPLETED IN RELEVANT TO A.Y. 200 6-07 TO 2012-13 WHEREIN ALSO THE SIMILAR ADDITIONS WERE MADE ON ACC OUNT OF ALLEGED SUPPRESSION OF YIELD. THE AO HAS SIMPLY CONTINUED WITH THE ADDITIONS TOWARDS LOWER YIELD AS SHOWN IN THE SEARC H ASSESSMENT ON THE GROUND THAT THE DELETION OF ADDITION IN FIRST A PPELLATE ORDER IN ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 4 - THOSE YEARS HAVE NOT BEEN AGREED BY THE DEPARTMENT AND AN APPEAL HAS BEEN PREFERRED AGAINST THE FIRST APPELLATE ORDE R BEFORE THE ITAT WHICH IS PENDING FOR ADJUDICATION. 5. AGGRIEVED BY THE ADDITIONS MADE TOWARDS LOWER YI ELD, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE C IT(A), AFTER TAKING NOTE OF ATTENDANT FACTS AND CIRCUMSTANCES, D ELETED THE ADDITIONS SO MADE FOR WHICH THE CONCLUDING OPERATIV E PARA IS REPRODUCED FOR READY REFERENCE: 10. I HAVE CONSIDERED THE GROUNDS OF APPEAL, GONE THROUGH THE ORDER OF THE AO AND SEEN THE SUBMISSION OF THE APPELLANT. I OBSERVE THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNTS U/S 145 OF TH E ACT AND FOR DOING SO THE AO HAS MENTIONED THAT THE GP RATE OF THE APP ELLANT HAS GONE DOWN DRASTICALLY AS COMPARED TO THE PRECEDING YEARS AND THE APPELLANT HAD NOT SATISFACTORILY EXPLAINED THE REASONS FOR DE CLINE IN GP AND NP RATES. THE AO FURTHER STATED THAT THE YIELD DECLARE D BY THE APPELLANT IN STEEL MELTING SHOP I.E. SMS DIVISION IS NEARLY 83.3 2% WHICH IS MUCH BELOW THE AVERAGE YIELD IN THE LAST 7 ASSESSMENT YE ARS OF THE ASSESSEE ITSELF AND THEREAFTER THE AO CALCULATED THE AMOUNT OF SUPPRESSION IN PRODUCTION AND SALES BY TAKING THE YIELD OF 89% AND WORKED OUT THE AMOUNT OF SUPPRESSION IN SALES AND INCOME AND MADE AN ADDITION OF RS 15,94,08,394/-. THE AO FURTHER STATED THAT FOR THE BETTER COMPARISON ACROSS PARTIES DEALING WITH THE SAME MANUFACTURING BUSINESS, ENQUIRIES WERE DONE IN THE YIELD PERCENTAGE BEING OFFERED BY OTHER ASSESSEES BEING ASSESSED DURING THE SAME YEAR, ON PERUSAL OF AUDIT REPORTS AND BALANCE SHEETS OF VARIOUS OTHER PARTIES IN THE SAME BUSINESS, IT WAS SEEN THAT YIELD PERCENTAGE OF AS HIGH AS 97% HAS BE EN FURNISHED FOR MANUFACTURING OF MS INGOT/BILLETS. 10.1 IN ITS SUBMISSION AND AGAINST THE VIEWS OF TH E AO, THE APPELLANT STATED THAT THE AO HAS ONLY PROVIDED FIGURES OF YIE LD DECLARED BY ANOTHER PARTY BUT THE AO HAS NOT PROVIDED THE COMPL ETE DETAILS RELATING TO COMPARABLE INSTANCE, EVEN THE AO HAS NOT PROVIDE D THE NAME OF THE PARTY WHOSE FIGURES HAVE BEEN MENTIONED IN THE ASSE SSMENT ORDER AND BENCHMARKED AGAINST HIM. IT WAS STATED THE AO HAS A DOPTED HIGHER YIELD I.E. YIELD OF 89%, ON THE BASIS OF CERTAIN UN KNOWN AND UNSPECIFIED COMPARABLE CASES, WITHOUT CONFRONTING THE SAME TO T HE APPELLANT. THE APPELLANT SUBMITTED THAT THE AO DID NOT MENTION IN THE ASSESSMENT ORDER WHETHER YIELD PERCENTAGE OF 97% PERTAINS TO S MS/CCM DIVISION OR ANY OTHER DIVISION AND THAT THE AO HAS ALSO NOT MENTIONED ABOUT THE NATURE OF PRODUCT, PRODUCTION MECHANISM, TECHNOLOGY BEING USED, SCALE OF OPERATION ETC. IT WAS STATED THAT THE AO HAS REP RODUCED THE TABLE SHOWING CALCULATION OF YIELD, IN THE SAID TABLE, NA ME OF 'BILLETS' FIGURES AS' RAW MATERIAL' AGAINST WHICH YIELD % OF 97% HAS BEEN MENTIONED 'BILLETS', IN FACT, CONSTITUTES 'FINISHED PRODUCTS' OF SMS DIVISION AND NOT RAW MATERIAL AS HAS BEEN MENTIONED BY THE AO IN THE SAID TABLE. IT ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 5 - WAS CLARIFIED BY THE APPELLANT THAT BILLETS CONSTIT UTE RAW MATERIAL IN THE ROLLING MILL DIVISION AND NOT IN THE SMS/CCM DIVISI ON AND THAT IN THE INSTANT CASE OF THE APPELLANT, THE AO HAS MADE THE ADDITION IN RESPECT OF SMS/CCM DIVISION AND NOT IN RESPECT OF ROLLING M ILL DIVISION, THUS, IT WAS CONTENDED THAT THE AO SEEMS TO HAVE FALLEN I NTO ERROR. THE APPELLANT FURTHER SUBMITTED THAT SINCE THE COMPLETE DETAILS WERE NOT PROVIDED BY THE AO, THEREFORE, SAME CANNOT BE SAID TO HAVE ANY EVIDENTIARY VALUE. THE ASSESSMENTS IN THE CASE OF T HE APPELLANT IN ALL THE PRECEDING A.YS HAVE BEEN COMPLETED ADOPTING YIE LD RATE OF 89% IN THE SMS DIVISION. 10.2 VIDE THIS OFFICE LETTER DATED 7.12.2017 IN F. NO.CIT(A)- 11/RPR/APPEAL PROCEED 2017-18 DATED 07.12.2017 IN T HE CASE OF THE APPELLANT FOR A.Y 2013-14 THE AO WAS ASKED TO EXPLA IN THE BASIS FOR ADOPTING YIELD AT 89% VIDE LETTER DATED 21.12.2017 THE AO HAS ENCLOSED THE ASSESSMENT ORDER OF THE APPELLANT FOR THE AY 20 06-07 TO 2012-13 AND RELIED UPON THE FINDINGS AND CONCLUSION OF THE PREDECESSOR AO IN THE SEARCH ASSESSMENT PROCEEDINGS COMPLETED IN THE CASE OF THE APPELLANT. I OBSERVE THAT THE ADDITION MADE IN THE SEARCH ASSESSMENT BY ADOPTING 89% YIELD IN THE SMS DIVISION STANDS DELET ED BY MY LD PREDECESSOR IN HIS ORDER WHICH HAVE BEEN FOLLOWED I N THE ORDER PASSED BY ME FOR AY 2013-14 ON THE SAME FACTS AND CIRCUMS TANCES. AS REGARDS DECLINE IN GP RATE THE APPELLANT CONTENDED THAT THE IRON AND STEEL SECTOR HAD BEEN GOING THROUGH A CHALLENGING FACE OW ING TO SLUGGISH DOMESTIC DEMAND AND CONSTRAINTS OF IRON ORE SUPPLY ALONG WITH STEEP RISE IRON ORE PRICES. IT WAS BROUGHT TO MY NOTICE T HAT THE COST OF POWER IN SMS DIVISION HAS INCREASED BY NEARLY 6.27% IN CO MPARISON TO THE FY 2014-15 AND IN THE CASE OF ROLLING MILL DIVISION IT HAS INCREASED BY NEARLY 15.08%. MY ATTENTION WAS ALSO INVITED TO THE DECREASE IN THE SELLING RATE OF OUTPUT OF SMS AND ROLLING MILL DIVI SION. IT WAS SUBMITTED THAT THE SELLING RATE IN SMS DIVISION HAS DECREASED BY NEARLY 24.29% IN COMPARISON TO THE FY 2013-14 AND IN THE CASE OF ROL LING MILL DIVISION IT HAD DECREASED BY NEARLY 28.82% IN COMPARISON TO IMM EDIATELY PRECEDING YEAR. MY ATTENTION WAS ALSO DRAWN TO THE INCREASE IN COST ON ACCOUNT OF SALARY EXPENSES. 10.3 I OBSERVE THAT THE AO HAS MADE ADDITION BY EST IMATING THE YIELD AT 89% OF THE TOTAL RAW MATERIAL CONSUMED IN THE SMS D IVISION AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT. T HE ONLY REASON FOR REJECTION OF BOOKS OF ACCOUNTS ADDUCED BY THE AO IS THAT THE APPELLANT HAD DECLARED YIELD IN SMS DIVISION LESS THAN 89%. I N THE OPINION OF THE AO AS CAN BE SEEN THE YIELD OF THE APPELLANT COMPAN Y SHOULD HAVE BEEN SAME IN ALL THE YEARS AS THE NATURE OF THE BUSINESS IS THE SAME AS IT WAS DURING THE PERIOD COVERED UNDER THE SEARCH PROCEEDI NGS. IN THE ASSESSMENT ORDER THE AO HAS NOT BROUGHT ON RECORD A NY IRREGULARITY OR DEFECT IN THE BOOKS OF ACCOUNTS BILLS AND VOUCHERS AND OTHER DOCUMENTARY EVIDENCES PERTAINING TO THE YEAR UNDER CONSIDERATION. WHAT CAN BE NOTICED FROM THE ASSESSMENT ORDER IS TH AT THE AO HAS BASED THE ASSESSMENT ON THE OUTCOME OF THE SEARCH ASSESSM ENT PROCEEDINGS FOR THE SEARCH PERIOD COVERED DURING ACTION U/S 132 OF THE ACT AND EXTENDED THE SAME TO THE IMPUGNED ASSESSMENT YEAR I.E. 2016- 17 WHICH IN MY OPINION HAD NO BEARING FOR THE ASSESSMENT PROCEEDIN GS OF THE IMPUGNED AY. ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 6 - 10.4 THERE IS NO MERIT IN THE CONTENTION OF THE AO THAT THE CONCLUSIONS DRAWN IN THE SEARCH ASSESSMENT PROCEEDI NGS AND ENHANCEMENTS MADE, WHICH IN FACT WERE DELETED, CAN BE MADE BASIS FOR ASSESSING THE INCOME OF OTHER SUBSEQUENT YEARS WITH OUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF EARLIER YEARS OR THE YEA R IN QUESTION. EACH YEAR'S ASSESSMENT IS A SEPARATE ASSESSMENT WHICH AT TAINS FINALITY FOR THE YEAR UNLESS DISTURBED BY COGENT FACTS AND MATERIALS , AND CANNOT BE EXTENDED FOR SUBSEQUENT YEARS WITHOUT ANY VALID REA SONS. THE FINDINGS IN THE SEARCH ASSESSMENTS FOR THE RELEVANT YEARS CA NNOT BE STRETCHED FOR LATER YEARS BY ADOPTING THE FIGURES OF THE SEARCH A SSESSMENT AS A BENCHMARK FOR THE SUBSEQUENT YEARS EVEN IF THE ASSE SSEE IS CARRYING ON THE SAME BUSINESS. THE FACTS AND CIRCUMSTANCES OF E ACH YEAR ARE TO BE CONSIDERED SEPARATELY AND MUST FIND REFERENCE IN TH E ASSESSMENTS COMPLETED ON THE BASIS OF COGENT MATERIAL. IN THE C ASE OF RAMESH STEEL INDUSTRIES IN ITA NO: 48 OF 2015 THE HON'BLE CHHATT ISGARH HIGH COURT HELD THAT THE GRAPH OF BUSINESS WAS NOT ALWAYS IN A STRAIGHT LINE AND FLUCTUATES FROM YEAR TO YEAR. UNDER SECTION 145(3)O F THE ACT THE JURISDICTION OF THE ASSESSING OFFICER ARISES IF HE WAS NOT SATISFIED WITH THE ACCOUNTS OF THE ASSESSEE. 10.5 I FURTHER OBSERVED THAT THE BOOKS OF ACCOUNT S OF THE APPELLANT WAS SUBJECT TO TAX AUDIT AND SINCE THE APPELLANT IS DEALING IN EXCISABLE PRODUCT IT HAS FILED EXCISE RETURNS ON MONTHLY BASI S AS WELL AS THE VAT RETURNS AS PER SALES TAX LAWS. THESE EVIDENCES WERE PRODUCED BEFORE THE AO WHO EXAMINED THE SAME INCLUDING THE BILLS AND VO UCHERS. WITH A VIEW TO BRINGING ON RECORD BASIS BEHIND ADOPTION OF YIELD AT 89% IN THE APPELLANT PROCEEDINGS OF A.Y. 2013-14 THE AO WAS AS KED TO CONVEY THE BASIS FOR DOING SO. FROM THE REMAND REPORT OF THE A O IT WAS FOUND THAT THE RELIANCE WAS PLACED ON THE ASSESSMENT ORDER PAS SED U/S 153A R.W.S 143(3) FOR THE SEARCH PERIOD I.E. AY 2006-7 TO 201 2-13. IMPORTANTLY EVEN IN THE ASSESSMENT ORDER PERTAINING TO SEARCH P ERIOD THERE IS NO REFERENCE OF ANY SEIZED MATERIAL OR ANY OTHER DOCUM ENTARY EVIDENCES TO ESTABLISH THAT THE APPELLANT HAD INDULGED IN UNACCO UNTED PRODUCTION AND UNACCOUNTED SALES, NOT ANY KIND OF JUSTIFICATIO N HAVE BEEN MADE IN ADOPTION OF 89% YIELD. THE ADDITIONS WERE MADE MAIN LY ON THE PRETEXT THAT THE AVERAGE YIELD IN THE INDUSTRY IS NEARLY 89 % AND THE YIELD DECLARED BY THE APPELLANT IS LOW AS COMPARED TO THE YIELD SHOWN BY OTHER MANUFACTURERS OF CHHATTISGARH. THERE COULD BE SEVERAL REASONS FOR VARIATION OF GP AND NP BUT THE VARIATION PER SE IS NOT SUFFICIENT TO DRAW AN INFERENCE THAT THE BOOKS OF ACCOUNTS ARE LI ABLE TO BE REJECTED U/S 145 UNTIL AND UNLESS SPECIFIC DEFECT OR IRREGUL ARITY ARE POINTED OUT AND BROUGHT ON RECORD PERTAINING TO THE BOOKS OF AC COUNTS OF THE APPELLANT. EVEN IN THE ASSESSMENT ORDER FOR THE YEA R UNDER CONSIDERATION IT APPEARS THAT THE EXTRACTS HAVE BEE N REPRODUCED WITHOUT MENTIONING THE SOURCES THEREOF, AND MOREOVER THE AO HAS NOT CONFRONTED THE SAME TO THE APPELLANT FOR ITS REBUTT AL. THE YIELD PERCENTAGE OF 97% REFERRED BY THE AO IN THE ASSESSM ENT ORDER WITH WHICH COMPARISON HAS BEEN MADE BY THE AO IS NOT OF SMS DIVISION AS THE BILLETS HAS BEEN MENTIONED IN THE TABLE AS RAW MATERIAL WHEREAS BILLETS ARE THE FINISHED PRODUCT OF SMS DIVISION. 10.6 I HAVE SEEN THE APPELLANT ORDER IN A.NO. 71 8 TO 722 FOR AY 2008- 09 TO 2012-13 OF MY ID PREDECESSOR WHO HAS ADJUDICA TED THE SEARCH ASSESSMENTS OF THE APPELLANTS FOR ALL THE YEARS AND DELETED THE ADDITION MADE. IT IS FRUITFUL TO REPRODUCE HIS OBSERVATIONS AS UNDER: ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 7 - IT IS SEEN THAT THE AO HAS NOT POINTED OUT ANY SUP PRESSION OF PRODUCTION BASED ON ANY COGENT AND INCRIMINATING MA TERIAL AGAINST THE APPELLANT. MATERIAL SHOWING FINANCIAL N EXUS CAN ONLY BE A VALID BASIS FOR HOLDING SUSPICION OR MAKING TH E ADDITION. UNFORTUNATELY, NOT A SINGLE DOCUMENT SHOWING ANY FI NANCIAL DEALINGS BY THE APPELLANT HAS BEEN REFERRED TO EITH ER IN THE ASSESSMENT ORDER, OR EVEN DURING THE COURSE OF HEAR ING, DESPITE THE LIBERTY GRANTED VIDE THIS OFFICE LETTERS ON 28. 04.2014 AND 16.05.2014. THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE REVEAL THAT THE AO JUST BRUSHED ASIDE THE OBJECTION S/SUBMISSIONS AND CONTENTIONS RAISED BY THE APPELLANT AND EVIDENC ES PLACED ON RECORD. THE AO HAS MADE MECHANICAL ADDITION OF THE DIFFERENCE BETWEEN THE UNACCOUNTED PRODUCTION/SALES WORKED OUT ON THE BASIS OF 89% YIELD SUSPECTED BY THE AO THAT MUST HA VE BEEN ACHIEVED BY THE APPELLANT. THE AO HAS NOT BROUGHT A NY MATERIAL ON RECORD TO DISBELIEVE THE BOOK RESULT SHOWN BY TH E APPELLANT. IF THERE IS NO SUPPRESSION OF MATERIAL FACTS, THE AUTH ORITY CANNOT EMBARK UPON A SPECULATIVE ASSESSMENT OF NOTIONAL PR OFITS. THE ASSESSMENT SHOULD BE BASED ON COGENT FACTS AND THER E SHOULD BE NO VINDICTIVENESS OR ARBITRARINESS IN PASSING THE A SSESSMENT ORDER. THE ESTIMATED ADDITIONS MADE BY THE AO DO NO T BEAR ANY RELATIONSHIP WITH THE SPECIFIC DEFECTS IN BOOKS OF ACCOUNTS AND THE AO CANNOT BE PERMITTED TO MAKE ARBITRARY ADDITI ON. THE CORE THING TO BE SEEN IS THE EVIDENCE FOUND WHICH WILL B E THE BASIS FOR MAKING THE ASSESSMENT. COMING TO THE FACTS OF THE C ASE, THE AO ESTIMATED UNACCOUNTED PRODUCTION AND SALES BASED ON BENCHMARK YIELD OF 89% IN CASE OF SMS DIVISION. THE ENTIRE ES TIMATED SUPPRESSED SALE HAS BEEN TREATED AS PROFIT. I AM CO NVINCED THAT THE DETERMINATION OF UNDISCLOSED INCOME IN THIS CAS E IS MERELY ON THE BASIS OF PRESUMPTION AND ON AN ESTIMATE BASIS. SEARCH ASSESSMENT HAS TO BE FRAMED ON THE BASIS OF SOME MA TERIAL, WHICH IN THIS CASE IS RAW MATERIAL CONSUMED IN SMS DIVISI ON FOR MANUFACTURING OF BLOOMS AND BILLETS IN FURNACE. NO OTHER MATERIAL OR ASSETS DETAILS WERE FOUND DURING THE CO URSE OF SEARCH. ON THE CONTRARY, THE APPELLANT HAD PROVIDED ALL THE REQUISITE DETAILS REGARDING ITS PRODUCTION ACTIVITY . THE ITEMS OF RAW MATERIAL PURCHASED ARE EXCISABLE PRODUCTS, THE QUANTITY OF RAW MATERIAL PURCHASE AS MENTIONED IN EXCISABLE AND COMMERCIAL INVOICE WAS TEST CHECKED WITH THE ENTRIE S IN THE EXCISE RECORD FOR RAW MATERIAL I.E. RG-1 AND THE SA ME WAS FOUND TO BE IN ORDER. THE QUANTITY APPEARING IN THE EXCIS E REGISTERS WAS CROSS CHECKED WITH THE ENTRIES IN THE EXCISE RETURN S AND THE SAME WAS FOUND TO BE IN ORDER AND TALLYING WITH EXCISE R ECORD. THE INVENTORY APPEARING IN THE EXCISE RECORDS AND EXCIS E RETURNS WAS FOUND TO BE THE SAME AS IN FINANCIAL RECORDS I.E. T HE BOOKS OF ACCOUNTS AND AUDITED FINANCIAL STATEMENTS. UNDISPU TEDLY, THE PRODUCTION WAS METICULOUSLY ROUTED THROUGH THE APPE LLANT'S DAILY PRODUCTION REGISTER/EXCISE RECORDS. THE ENTRIES THE REIN WERE DEFINITELY CO-RELATABLE TO THE ENTRIES IN THE STOCK REGISTER, ENABLING AN EASY STOCK TALLY, IF ONE WAS SO REQUIRE D. HOWEVER, THE AO DID NOT DEEM IT FIT TO CARRY OUT THE EXERCIS E OF TALLYING THE STOCK AS PER THESE ENTRIES IN THE TWO TYPES OF BOOK S .HE MERELY WENT BY THE ALLEGED SUPPRESSED YIELD. VARIOUS SUBMI SSIONS REGARDING REASONS FOR VARIATION IN CONSUMPTION OF P OWER, FURNACE OIL, YIELD ETC WERE DULY FURNISHED BY THE A PPELLANT. THE ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 8 - APPELLANT DID FURNISH THE COMPARABLE INSTANCES AND ALSO DEMONSTRATED WITH TECHNICAL DETAILS OF PRODUCTION. THESE COPIOUS EVIDENCES WERE WRONGLY IGNORED BY THE AO. COMMISSIO NER OF INCOME TAX VS. HINDUSTAN TIN WORKS LTD. (2007) 291 ITR 290 (DEL) : (2007) 164 TAXMAN 529. 10.7 FROM THE ABOVE OBSERVATIONS OF MY ID PREDECESS OR WHO ADJUDICATED THE SEARCH ASSESSMENTS FOR THE RELEVANT ASSESSMENT YEARS COVERED IN ACTION U/S 132 THERE WAS NO SEIZED MATER IAL LEADING TO THE CONCLUSION THAT THE APPELLANT HAS SUPPRESSED THE YI ELD AND HENCE ADOPTION OF 89% YIELD STOOD JUSTIFIED .WHEN THERE I S NO MATERIAL FOR ADOPTING 89% EVEN DURING THE SEARCH ASSESSMENT THER E IS NO BASIS FOR RELYING ON THE SEARCH ASSESSMENTS IN ADOPTING 89% Y IELD FOR THE YEAR UNDER CONSIDERATION. I ALSO OBSERVE THAT IN THE APP ELLATE ORDER MY ID PREDECESSOR HAS TABULATED COMPARABLE INSTANCES OF G P AND NP OF INDUSTRY AVERAGES WHEREIN THE GP AND NP OF THE APPE LLANT IS MUCH HIGHER THAN THE OTHERS. THE CASE LAWS RELIED UPON I N THE APPELLATE ORDER OF MY PREDECESSOR SOME OF WHICH ARE REPRODUCED AS U NDER ARE RELEVANT TO THE FACTS IN QUESTION. (A) ACIT VS M/S BALAJEE STRUCTURALS (1) PVT LTD (SU PRA), THE JURISDICTIONAL BENCH HONBLE ITAT; (B) ACIT VS. M/S SUPER IRON & STEEL PVT LTD, ITA NO . 139 TO 141/BLPR/2010; (C) LALCHAND BHAGAT AMBICA RAM VS. CIT (1959) 37 IT R 288; (D) INCOME TAX OFFICER VS. W.D. ESTATE P. LTD. (199 3) 46 TTJ (BOM) 143 : 45 ITD 473; (E) COMMISSIONER OF INCOME TAX VS. DISCOVERY ESTATE S PVT. LTD. (2013) 356 ITR 159 (DELHI); (F) MANGILAL RAMESHWARLAL SONI (HUF) VS. ASSISTANT COMMISSIONER OF INCOME TAX (2004) 83 TTJ (JD) 770: (2004) 4 SOT 680 (JD); (G) BANSAL STRIPS (P) LTD & ORS. VS. ASSISTANT COMM ISSIONER OF INCOME TAX (2006) 100 TTJ(DEL)665 : (2006) 99 ITD 1 77(DEL) BY THE HONBLE ITAT, DELHI A BENCH; (H) DHAKESHWARI COTTON MILLS LTD. VS COMMISSIONER O F INCOME TAX (1954) 26 ITR 775 (SC); 10.8 THE APPELLANT ALSO RELIED UPON THE DECISION O F THE JURISDICTIONAL OF HIGH COURT OF CHHATTISGARH IN M/S RAMESH STEEL I NDUSTRIES VS. DCIT- 1(1), RAIPUR, TAX CASE (ITA) NO. 48 OF 2015 WHEREIN THE HON 'BLE HIGH COURT HAS INTER ALIA HELD THAT POWER CONSUMPTION IN AN INDUSTRY MAY VARY FOR VARIOUS REASONS, THE APPELLANT ALSO RELIED UPON THE DECISION OF THE JURISDICTIONAL ITAT RAIPUR BENCH IN ACIT-1(2), RAIPUR VS BALAJEE STRUCTURAL (INDIA ) PVT LTD, RAIPUR WHEREIN FOLLOWI NG FACTS WERE NOTED: 'THE APPELLANT HAS MAINTAINED QUANTITATIVE DETAILS AS PER REQUIRED UNDER EXCISE RULES. MONTHLY RETURNS ARE AL SO SUBMITTED TO THE EXCISE AUTHORITIES AND NO DISCREPANCY WAS NO TICED SO AS TO ESTABLISH THAT THE YIELD SHOWN BY THE APPELLANT IS UNREASONABLE OR ON LOWER SIDE IN COMPARISON TO YIELD PREVAILING IN THIS LINE OF INDUSTRY. THE YIELD SHOWN BY THE APPELLANT IN RESPE CT OF FURNACE DIVISION IS 81% AS AGAINST 76% OF THE IMMEDIATELY P RECEDING YEAR AND IN RESPECT OF ROLLING MILL DIVISION IT IS 93% WHICH IS AT PAR WITH THAT OF IMMEDIATELY PRECEDING YEAR. IN THE IMMEDIATELY PRECEDING YEAR, IN SCRUTINY ASSESSMENT, THE DEPARTM ENT HAS ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 9 - ACCEPTED THE BOOKS OF ACCOUNTS ON THE BASIS OF YIEL D OF FURNACE DIVISION AT 76% AND 93% OF ROLLING MILL DIVISION.' 10.9 IN THE APPELLANT'S OWN CASE FOR AY. 2013-14 I N APPEAL NO CIT(A) -11/RPR/A.NO.104 /17-18 DATED 02.02.2018 ON SAME FA CTS AND CIRCUMSTANCES THE APPEAL WAS ALLOWED BY ME BY HOLDI NG WHEN THERE IS NO MATERIAL FOR ADOPTING 89% EVEN DURING THE SEARCH ASSESSMENT THERE IS NO BASIS FOR RELYING ON THE SEARCH ASSESSMENTS I N ADOPTING 89% YIELD FOR THE AY 2013-14. IN ACCORDANCE WITH MAINTAINING CONSISTENCY AND UNIFORMITY ON SAME SET OF FACTS AND CIRCUMSTANCES A ND LEGAL POSITION AS DISCUSSED ABOVE I FIND NO BASIS FOR ADOPTING 89% YI ELD AND HENCE THE ADDITION OF RS 15,94,08,394/- IS UNWARRANTED. ACC ORDINGLY GROUNDS NO 2 & 3 ARE ALLOWED. 6. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED DR FOR THE REVENUE RELIED UPON THE OBSERVATIONS MADE BY TH E AO IN THE ASSESSMENT ORDER. 8. PER CONTRA, LEARNED COUNSEL FOR THE ASSESSEE PLA CED RELIANCE UPON THE FINDINGS IN THE ORDER OF THE CIT(A). THE LEARNED COUNSEL FURTHER SUBMITTED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE CO-ORDINATE BENCH OF T RIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 TO 2012-13 IN ITA NOS. 232 TO 235/RPR/2014 ORDER DATED 07.11.2019 . THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE BEING ONLY A CONTINUATION OF THE OLD CONTROVERSY WITHOUT ANY FACTUAL DEVIATION, THE CONC LUSION ALREADY ARRIVED AT BY THE CO-ORDINATE BENCH ON THE SUBJECT IN ISSUE REQUIRES TO BE FOLLOWED. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE STRAIGHTWAY FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH F OR A.YS. 2009-10 TO 2012-13 IN ITA NOS. 232 TO 235/RPR/2014 ORDER DATED 07.11.2019 . THE CO-ORDINATE BENCH OF THE TRIBUNAL DISMISSED THE ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 10 - APPEAL OF THE REVENUE AGAINST THE ORDER OF CIT(A) I N IDENTICAL FACTUAL AND LEGAL MATRIX. THE REVENUE HAS FAILED T O SHOW THE DEPARTURE IN SUBSTANTIAL FACTS. THE WHOLE BASIS FO R ADDITION ON ACCOUNT OF ALLEGED SUPPRESSION OF PRODUCTION IN SMS / FURNACE DIVISION IS MERELY RELYING UPON THE CONCLUSION DRAW N BY THE PREDECESSOR AO IN THE SEARCH ASSESSMENT OF THE ASSE SSEE, WHICH WAS FOUND TO BE UNSUSTAINABLE BOTH BY THE CIT(A) AS WEL L AS THE ITAT IN EARLIER YEARS. WE SIMULTANEOUSLY NOTE OF THE FACT THAT THE YIELD PERCENTAGE OF 97% REFERRED BY THE AO IN THE ASSESSM ENT YEAR WITH WHICH COMPARISON HAS BEEN MADE DOES NOT RELATE TO S MS DIVISION AS THE BILLETS HAVE BEEN MENTIONED IN THE TABLE AS RAW MATERIAL WHEREAS BILLETS ARE FINISHED PRODUCTS OF SMS DIVISION. IT APPEARS THAT AO HAS PROCEEDED ON MISCONCEPTION OF FACTS. THUS, ON THIS POINT TOO, THE ACTION OF THE AO IS NOT JUSTIFIABLE. IN CONSON ANCE WITH THE VIEW TAKEN IN THE MATTER, WE SEE NO MERIT IN THE APPEAL OF THE REVENUE. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE ITA T IS REPRODUCED HERE FOR READY REFERENCE: 8. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO ANALYZED THE JUDICIAL PRONOUNCEMENTS P LACED BEFORE US. THE FACTS ON RECORDS CLEARLY DEMONSTRATES THAT THE ASSESSING OFFICER HAS FAILED TO BRING ANY COGENT REASONS/EVIDENCES FO R MAKING ADDITION IN THE CASE OF THE ASSESSEE. HE HAS ARRIVED AT VARIOUS MATHEMATICAL CALCULATIONS AND HAS DERIVED THE YIELD AT 89%. ALL THESE WERE DONE BY THE ASSESSING OFFICER WITHOUT BRINGING ON RECORD AN Y SINGLE DOCUMENT WHICH INDICATES THAT THE ASSESSEE HAS SUPPRESSED IT S YIELD OR HAS INDULGED IN ANY UNACCOUNTED SALES. IT IS ALSO ON RE CORD THAT THOUGH THE ASSESSING OFFICER HAS ESTIMATED PRODUCTION AT 89% I N SMS DIVISION AND HAD MADE VARIOUS MATHEMATICAL CALCULATIONS AT PAGES 7 TO 11 OF THE ASSESSMENT ORDER REGARDING ROLLING MILL DIVISION, H OWEVER, IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICE R HAS NOT DRAWN ANY ADVERSE INFERENCE AS REGARDS ROLLING MILL DIVISION AND NOR DID THE ASSESSING OFFICER FIND YIELD OF ROLLING MILL DIVISI ON TO BE LOWER. THE ASSESSING OFFICER HAS NOT SUBSTANTIATED THE RELEVAN CE AND SIGNIFICANCE OF THESE MATHEMATICAL CALCULATIONS PERTAINING TO RO LLING MILL DIVISION. 8.1 WE FURTHER OBSERVE THAT THE LD. CIT(A) ON HIS O WN CONDUCTED SPECIFIC ENQUIRY IN ORDER TO FIND OUT THE PERCENTAG E OF YIELD DECLARED BY THE OTHER ASSESSEE ENGAGED IN SIMILAR LINE OF BUSIN ESS. IT IS NOTED FROM SUCH COMPARISON THAT THE YIELD DECLARED BY THE DIFF ERENT ASSESSEES IN THE SAME YEAR IS NOT UNIFORM, CONVERSELY EVERY ASSE SSEE DECLARED ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 11 - DIFFERENT YIELD. NOT EVEN A SINGLE COMPARABLE INSTA NCE WAS FOUND DECLARING YIELD OF 89%. THAT FURTHER, ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS MERELY DUE TO THE R EASON THAT THE YIELD ACHIEVED BY THE ASSESSEE IS LESS THAN THE YIELD PER CENTAGE I.E.89% WHICH HAS NOT BEEN ACHIEVED EVEN BY OTHER ASSESSEES ENGAGED IN SIMILAR LINE OF BUSINESS. THE ASSESSING OFFICER HAS NOT BRO UGHT ON RECORD THE MANNER IN WHICH HE HAS WORKED OUT YIELD OF 89% IN S MS DIVISION. 9. IN THE CASE OF M/S. RAMESH STEEL INDUSTRIES VS. DCIT-1(1), RAIPUR, ITA NO.48 OF 2015, THE HON'BLE CHHATTISGARH HIGH COURT HAS HELD AND OBSERVED THAT 'THE POWER OF THE ASSESSING OFFICER U NDER SECTION 145(3) IS NOT ABSOLUTE BUT WAS REGULATED AND CIRCUMSCRIBED BY STATUTORY PROVISIONS.' THAT FURTHER 'POWER CONSUMPTION IN AN INDUSTRY MAY VARY FOR VARIOUS REASONS. UNDER SECTION 145(3) OF THE IN COME TAX ACT, THE JURISDICTION OF THE ASSESSING OFFICER ARISES IF HE WAS NOT SATISFIED ABOUT THE CORRECTNESS OF THE ACCOUNTS OF THE ASSESSEE. HO WEVER, THE ASSESSING OFFICER SHOULD GIVE SPECIFIC REASONS FOR REJECTING BOOKS OF ACCOUNTS.' 10. IN THE INSTANT CASE, THE ASSESSING OFFICER CALC ULATED YIELD OF 89% AND HAS ALSO CALCULATED CONSUMPTION OF POWER AND DI FFERENCE THERETO PERTAINING TO PRODUCTION AND HAS HELD THAT THE BOOK S OF ACCOUNTS ARE THEREFORE NOT RELIABLE AND REJECTED THE BOOKS OF AC COUNT WHILE RESORTING TO SECTION 145(3) OF THE ACT. AS PER THE LEGAL PRIN CIPLES LAID DOWN BY THE HON'BLE CHHATTISGARH HIGH COURT (SUPRA.) THAT T HIS POWER IS NOT UNFETTERED AND IT HAS TO BE USED JUDICIALLY BY GIVI NG SPECIFIC REASONS WHICH IN THE INSTANT CASE, THE ASSESSING OFFICER HA S NOT COMPLIED WITH. 11. IN THE CASE OF ACIT-1(1), RAIPUR VS. SIYARAM RICE MILL IN ITA NO.59/BLPR/2011 , THE RAIPUR BENCH OF THE TRIBUNAL HAS OBSERVED THA T 'IN A CASE WHERE THE ASSESSING OFFICER HAD APPLIED A MATHEMATICAL FORMULA AND MADE ADDITION BUT HOWEVER, REJECTED ALL THE SUBMISSIONS OF THE ASSESSEE WITHOUT PASSING SPEAKING OR REASONED O RDER'. THE RAIPUR BENCH OF THE TRIBUNAL FURTHER HELD THAT REGARDING M ATHEMATICAL CALCULATION, THE ASSESSING OFFICER HAS NOT REFERRED TO ANY COMPARABLE CASES THAT COULD PROVE THAT THE STAND TAKEN BY HIM WAS BASED ON SCIENTIFIC AND LOGICAL BASIS. THAT FURTHER 'A REASO NED ORDER CANNOT BE PASSED WITHOUT CONSIDERING THE REPLY OF THE ASSESSE E FILED BY THE ASSESSEE AND WITHOUT GIVING REASONS AS TO WHY THE R EPLY WAS NOT ACCEPTABLE.' 12. IN THE INSTANT CASE, THE LD. CIT(A) HAD MADE EX ERCISE TO BRING OUT THE PERCENTAGE OF YIELD DECLARED BY THE OTHER ASSES SEE ENGAGED IN SIMILAR LINE OF BUSINESS AND NOWHERE THE YIELD WAS 89%. THE ASSESSING OFFICER ALSO GAVE NO BASIS FOR ITS CALCULATION OF T HE YIELD AT 89%. THERE WAS NO SCIENTIFIC OR LOGICAL BASIS IN THE EXERCISE CONDUCTED BY THE ASSESSING OFFICER. THE SUBMISSIONS MADE BY THE ASSE SSEE, WERE ALSO SUMMARILY REJECTED BY THE ASSESSING OFFICER WHICH I S THEREFORE, NOT IN ACCORDANCE WITH JUDICIAL PRINCIPLE AS HEREIN ABOVE ENSHRINED IN THE VARIOUS JUDICIAL PRONOUNCEMENTS. WE HAVE ALSO OBSER VED IN THE CASE OF ACIT-1(1) RAIPUR VS. RAMESH STEEL INDUSTRIES IN ITA NO.95/BLPR/2011, THE ASSESSING OFFICER MADE ADDITION AS HE NOTED THAT IN THE YEAR UNDER APPEAL, THE ASSESSEE HAD CON SUMED MORE UNITS OF POWER AS COMPARED TO THE LAST TWO ASSESSMENT YEARS. THE TRIBUNAL OBSERVED THAT 'CONSUMPTION OF POWER IN ITSELF IS NO T AN EVIDENCE TO PROVE OR DISPROVE THE PRODUCTION OF FINISHED GOODS. ' WE FURTHER OBSERVE ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 12 - THAT IN THE CASE OF ST. TERESSA'S OIL MILL (761 ITR 365) AND SULABH MARBLES (P.) LTD. (205 CTR 464) DECIDED BY THE HON' BLE KERALA AND RAJASTHAN HIGH COURT HAS HELD THAT 'DISPARITY IN EL ECTRICITY CONSUMPTION CANNOT BE THE CRITERIA FOR REJECTION OF ACCOUNTS AND FOR MAKING AD-HOC ADDITIONS. THE ASSESSEE HAD MAINTAINE D REGULAR BOOKS OF ACCOUNT AND THE ASSESSING OFFICER HAD NOT COME ACRO SS ANY UNACCOUNTED PURCHASE OR SUPPRESSED SALE. IN THESE C IRCUMSTANCES, ONLY ON THE BASIS OF POWER CONSUMPTION, NO ADDITION COUL D BE OR SUSTAINED.' 13. IT IS APPARENT FROM THE RECORDS THAT THE ASSESS ING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE STATING LOWER OR SUP PRESSION OF SALES BY THE ASSESSEE. HE TRIED TO SUPPORT HIS CASE BY SHOWI NG DEFICIENCY IN POWER CONSUMPTION BY THE ASSESSEE. BUT THE HON'BLE HIGH COURTS HAVE HELD WITHOUT ANY DIRECT CORROBORATIVE EVIDENCES ON LOW YIELD OR SUPPRESSED SALES, THE DISPARITY OF POWER CONSUMPTIO N CANNOT BE THE SOLE GROUND OR REASON FOR MAKING ADDITION BY THE ASSESSI NG OFFICER. 14. IN VIEW OF THE AFORESAID EXAMINATION OF FACTS A ND JUDICIAL PRONOUNCEMENTS, WE FIND THE ORDER OF THE LD. CIT(A) IS ABSOLUTELY CORRECT AND THEREFORE, THE SAME DOES NOT CALL FOR A NY INTERFERENCE. THUS, GROUND RELATING TO 'ISSUE OF THE LOWER YIELD DECLARED BY THE ASSESSEE' IN ALL THE APPEALS FOR ALL THE ASSESSMENT YEARS ARE THEREFORE DISMISSED. IN THE LIGHT OF THE VIEW TAKEN BY THE CO-ORDINATE B ENCH IN THE CASE OF ASSESSEE IN EARLIER ASSESSMENT YEARS, THE ISSUE IS NO LONGER RES INTEGRA . IT IS EVIDENT THAT ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR AYS. 2009-10 TO 2012-13 WHEREIN ALSO THE APPEAL OF THE REVENUE WAS DISMISSED AFTER ELABORATE DISCUSSION ON FACTUAL AND LEGAL MATRIX. THE REVENUE COULD NOT BRING ANY COGENT REASON TO TAKE A DEPARTU RE FROM THE EARLIER VIEW. THUS, IN CONSONANCE WITH THE VIEW EX PRESSED EARLIER, WE DO NOT SEE ANY MERIT IN THE PLEA OF THE REVENUE FOR RESTORATION OF THE ADDITIONS DELETED BY THE CIT(A) ON THIS SCORE. 10. IN THE RESULT, GROUND NOS. 1 TO 3 OF THE REVENU ES APPEAL TOWARDS ALLEGED LOWER YIELD OF PRODUCTION IS DISMIS SED. 11. GROUND NOS. 4 & 5 CONCERN DISALLOWANCE UNDER S. 14A OF THE ACT. THE ADDITIONS MADE BY RESORTING TO SECTION 14 A OF THE ACT WERE DELETED BY THE CIT(A) ON THE FOLLOWING REASONI NGS: ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 13 - 15 I HAVE CONSIDERED THE GROUNDS OF APPEAL, PERUSE D TO THE ASSESSMENT ORDER AND GONE THROUGH THE SUBMISSIONS O F THE APPELLANT. I OBSERVE THAT THE APPELLANT HAS CLAIMED THAT NO EXPE NDITURE WAS INCURRED IN RELATION TO EXEMPT INCOME AND THAT THE INVESTMENTS WERE MADE IN THE PRECEDING YEARS AND NOT DURING THE YEAR UNDER CONSIDERATION EXCEPT INVESTMENT OF RS 14.41 CRORES. THE AO HAS NOTED THAT NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESS EE DURING THE YEAR UNDER CONSIDERATION FROM INVESTMENTS IN SHARES. THE APPELLANT HAS CLAIMED THAT THE CASH PROFITS EARNED BY THE APPELLA NT IN THE YEAR IN WHICH THE INVESTMENTS WERE MADE IN THE SHARES OF GR OUP COMPANIES WAS MORE THAN THE AMOUNT OF INVESTMENT IN SHARES AND AL SO THAT THE INVESTMENTS WERE MADE OUT OF NON-INTEREST BEARING F UNDS AVAILABLE WITH THE APPELLANT. THE DETAILS OF NON-INTEREST BEARING FUNDS AVAILABLE WITH THE APPELLANT AND CASH PROFITS EARNED BY THE APPELLANT AND AMOUNT OF INVESTMENTS MADE IN SHARES ARE REPRODUCED HERE UNDER: CALCULATION OF NET WORTH AND NON INTEREST BEARING F UNDS RS. IN LACS PARTICULARS 31.03.2006 31.03.2009 31.03.2011 31.03.2013 31.03.2015 31.03.2016 SHARE CAPITAL 1654.27 3854.27 4654.27 4557.32 4557.04 4557.04 RESERVE AND SURPLUS 1758.92 3637.59 6528.65 7470.39 7915.33 6389.97 DEFERRED TAX LIABILITIES/(DEFERRED TAX ASSET) -497.88 458.05 566.38 683.47 618.21 945.61 TOTAL NET WORTH 2915.31 7949.91 11749.30 12711.18 13090.58 11892.62 ADD: NON INTEREST BEARING FUNDS A) UNSECURED LOAN 1841.48 1765.00 355.00 1416.5 174.50 100.00 B) ADVANCE FROM CUSTOMERS 244.08 358.42 771.77 536.61 564.80 584.63 C)SHARE APPLICATION MONEY 0.00 230.00 1645.00 0.00 0.00 0.00 TOTAL NON INTEREST BEARING FUNDS 5000.87 10303.33 14521.07 14664.29 13755.38 12477.25 TABLE SHOWING PROPORTION OF INVESTMENT TO CASH PROF IT EARNED BY THE ASSESSEE DURING THE F.Y IN WHICH INVESTMENTS WERE M ADE F.Y INVESTMENT (RS. IN LACS) NET-WORTH (RS. IN LACS) INVESTMENT TO NET-WORTH RATIO (%) TOTAL NON- INTEREST BEARING FUNDS (RS. IN LACS) INVESTMENT TO NON-INTEREST BEARING FUNDS RATIO (%) 2005-06 30.01 2915.31 1.03 5000.87 0.60 2008-09 200.00 7949.91 2.52 10303.33 1.94 2010-11 10.00 11749.30 0.09 14521.07 0.07 2012-13 282.00 12711.18 2.21 14664.29 1.92 2014-15 999.92 13090.58 7.64 13755.38 7.27 2015-16 1441.41 11892.62 12.12 12477.25 11.55 ON GOING THROUGH THE ABOVE SUBMISSIONS AND DETAILS OF TOTAL NON- INTEREST BEARING FUNDS AVAILABLE WITH THE APPELLANT AND CASH PROFITS EARNED IN THE RESPECTIVE YEARS AND PROPORTION THERE OF UTILIZED BY THE ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 14 - APPELLANT IN INVESTMENT IN SHARES I FIND THAT THERE WAS SUFFICIENT NON- INTEREST BEARING FUNDS AND CASH PROFIT AVAILABLE WI TH THE APPELLANT FOR MAKING THE INVESTMENT IN SHARES. WHAT IS IMPORTANT IN THIS REGARD IS THAT THE APPELLANT HAD SUFFICIENT NON-INTEREST BEAR ING FUNDS FOR MAKING THE INVESTMENTS IN SHARES OF THE GROUP COMPANIES. A S STATED EARLIER THE APPELLANT HAS NOT EARNED ANY EXEMPT INCOME IN THE R ELEVANT ASSESSMENT YEAR WHICH COULD RAISE THE ISSUE OF DISALLOWANCE U/ S 14A OF THE ACT. IT WAS HELD IN THE CASE OF PCIT VS OIL INDUSTRIES DEVE LOPMENT BOARD REPORTED IN 262 TAXMANN 103 (DELHI) THAT IN THE ABS ENCE OF ANY EXEMPT INCOME DISALLOWANCE U/S 14A OF THE ACT OF ANY AMOUN T WAS NOT PERMISSIBLE. ON SAME FACTS THE HON'BLE SUPREME COUR T IN THE CASE OF CIT VS CHETTINAD LOGISTICS PVT. LTD, DISMISSED THE SLP OF THE DEPARTMENT. IN VIEW OF THE ABOVE THE DISALLOWANCE O F RS.1,09,83,112/- BY INVOKING SECTION 14A IS UNWARRANTED AND ACCORDIN GLY GROUND NO. 4 IS ALLOWED. 12. ON PERUSAL OF THE RECORDS AND HAVING REGARD TO THE REPRESENTATION MADE BY BOTH SIDES, WE FIND TWO REAS ONS TO AGREE WITH THE CONCLUSION DRAWN BY THE CIT(A). FIRSTLY, IT EMERGES THAT THE ASSESSE HAS NOT DERIVED ANY EXEMPT INCOME PER SE. IT IS WELL SETTLED THAT IN THE ABSENCE OF ANY EXEMPT INCOME, N O DISALLOWANCE UNDER S.14A OF THE ACT IS PERMISSIBLE IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CORRTECH ENERGY P. LTD. 372 ITR 97 (GUJ.) . IN ANOTHER JUDGMENT IN THE CASE OF CIT VS. VISION FINSTOCK LTD. TAX APPEAL NO. 486 OF 2017 DATED 31.07.2017 THE HONBLE GUJARAT HIGH COURT HAS ONCE AGAIN EXPRESSED THE SIMILAR VIEW AND HELD THAT DISALLOWAN CE OF EXPENDITURE IN TERMS OF SECTION 14A R.W. RULE 8D CA NNOT EXCEED THE EXEMPT INCOME ITSELF. IT IS NOTICED THAT SLP(CIVIL) [DIARY NO. 13152/2018 ] FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN VISION FINSTOCK LTD. (SUPRA) HAS BEEN DISMISSED ON MERITS BY THE HONBLE SUPREME COU RT VIDE ORDER DATED 07.05.2018. THE REFERENCE IS ALSO MADE TO TH E DECISION OF HONBLE SUPREME COURT OF INDIA IN CIT VS. CHETTINAD LOGISTICS (P.) LTD. (2018) 95 TAXMANN.COM 250 (SC). 12.1 SECONDLY, THE ASSESSEE HAS DEMONSTRATED SUFFIC IENT NET WORTH FROM WHICH A PRESUMPTION WOULD NATURALLY ARISE THAT INVESTMENT FOR ITA NO. 5/RPR/2020 (DCIT VS. MAHAMAYA STEEL INDUSTRIES LTD.) A.Y. 2016-17 - 15 - THE PURPOSES OF EARNING EXEMPT INCOME IS OUT OF SUC H OWN INTEREST FREE FUNDS AVAILABLE AT THE DISPOSAL OF THE ASSESSE E. A REFERENCE IN THIS REGARD HAS BEEN MADE ON BEHALF OF THE ASSESSEE TO THE SEVERAL JUDICIAL PRECEDENTS INCLUDING CIT VS. HDFC BANK LTD. (2014) 89 CCH 0185 (BOMBAY HIGH COURT); CIT VS. SUZLON ENERGY LTD. (2013) 354 ITR 630 (GUJ.). 12.2 THUS, HAVING REGARD TO ABSENCE OF ANY EXEMPT I NCOME AS WELL AS AVAILABILITY OF SUFFICIENT NET WORTH OF INTEREST FREE NATURE, WE DO NOT SEE ANY REASON TO DIFFER WITH THE VIEW TAKEN BY THE CIT(A). THUS, NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. CONSEQUENTLY, GROUND NOS. 4 & 5 OF REVENUES APPEAL IS DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. SD/- SD/- (N. K. CHOUDHRY) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S. K. SINHA / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 / DR, ITAT, RAIPUR 5. 267 8 / GUARD FILE. BY ORDER 4 SR. PRIVATE SECRETARY ITAT 4 RAIPUR (ON TOUR) ORDER PRONOUNCED ON 22 / 1 0/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(4 ) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE, 1963.