Income-tax Officer, V. M/s. Matsyodari Steel & Alloys Pvt. Ltd., Jalna

ITA 6/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1568 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 02-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Business income; Additional evidence
• Section: 69C; 40A(3); 143(3); 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 1886 /PN/20 1 4 / ASSESSMENT YEAR: 20 1 0 - 11 MATSYODARI STEEL & ALLOYS PVT. LTD., D - 31 & 3 2, ADDL. MIDC, AURANGABAD ROAD, JALNA 431203 . / APPELLANT PAN: AA BCM9598D VS. THE INCOME TAX OFFICER , WARD 1(3), JALNA . / RESPONDENT . / ITA NO. 2171 /PN/201 4 . / ITA NO. 2171 /PN/201 4 / ASSESSMENT YEAR: 20 1 0 - 11 THE INCOME TAX OFFICER, WARD 1(3), JALNA . / APPELLANT VS. MATSYODARI STEEL & ALLOYS PVT. LTD., D - 31 & 3 2, ADDL. MIDC, AURANGA BAD ROAD, JALNA 431203 . / RESPONDENT PAN: AABCM9598D . / ITA NO. 2181 /PN/201 4 / ASSESSMENT YEAR: 20 1 1 - 1 2 MATSYODARI STEEL & ALLOYS PVT. LTD., D - 31 & 32, ADDL. MIDC, AURANGABAD ROAD, JALNA 431203 . / APPELLANT PAN: AABCM9598D 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 2 VS. VS. THE INCOME TAX OFFICER, WARD 1(3), JALNA . / RESPONDENT . / ITA NO. 06 /PN/201 5 / ASSESSMENT YEAR: 20 1 1 - 1 2 THE INCOME TAX OFFICER, WARD 1(3), JALNA . / APPELLANT VS. MATSYODARI STEEL & ALLOYS PVT. LTD., D - 31 & 32, ADDL. MIDC, AURANGABAD ROAD, JALNA 431203 . / RESPONDENT PAN: AABCM9598D . / ITA NO. 1885 /PN/201 4 / ASSESSMENT YEAR: 20 07 - 08 / ASSESSMENT YEAR: 20 07 - 08 MATSYODARI S TEEL & ALLOYS PVT. LTD., D - 31 & 32, ADDL. MIDC, AURANGABAD ROAD, JALNA 431203 . / APPELLANT PAN: AABCM9598D VS. THE INCOME TAX OFFICER, THE INCOME TAX OFFICER, WARD 1(3), JALNA . / RESPONDENT ASSESSEE BY : S HRI J.P. BAIRAGRA REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 0 7 .0 7 .201 6 / DATE OF PRONOUNCEMENT: 14 . 0 7 .201 6 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 3 / ORDER / ORDER PER SUSHMA CHOWLA, JM: OUT OF T HIS BUNCH OF APPEAL S , CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE AGAINST SEPARATE ORDER S OF CIT (A) , AURANGABAD , DATED 19.09.2014 AND 28.10.2014 RELATING TO ASSESSMENT YEAR S 20 1 0 - 11 & 2011 - 12 AGAINST RESPECTIVE ORDER S PASSED UNDER SECTION S 1 4 3 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . THE PASSED UNDER SECTION S 1 4 3 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . THE ASSESSEE IS ALS O IN APPEAL AGAINST THE ORDER OF CIT(A), AURANGABAD, DATED 27.08.2014 RELATING TO ASSESSMENT YEAR 2007 - 08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. THIS BUNCH OF APPEALS RELATING TO THE SAME ON SIMI LAR ISSUE S WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, FIRST WE MAKE REFERENCE TO THE FACTS AND ISSUES IN ITA NO.1886/PN/2014 AND ITA NO.2171/PN/2014 FOR ADJUDICATING THE ISSUES. 3 . THE A SSESSEE IN ITA NO. 1 886 /PN/201 4 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE INCOME TAX ACT, 1961. 2. THE LEARNED CIT ( APPEALS) FURTHER ERRED IN ESTIMATING THE GROSS PROFIT 2. THE LEARNED CIT ( APPEALS) FURTHER ERRED IN ESTIMATING THE GROSS PROFIT AFTER REJECTING BOOKS OF ACCOUNTS AND DIRECTING TO MAKE ADDITION OF RS. 1,12,97,400 / - 3. THE LEARNED CIT (APPEALS) FURTHER ERRED IN DIRECTING TO MAKE GROSS PROFIT ADDITION OF RS. 1,12,97,400 / - ON AC COUNT OF FOLLOWING THREE DISCREPANCIES POINTED BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS AS THESE DISCREPANCIES WERE NOT POINTED OUT DURING REGULAR ASSESSMENT PROCEEDINGS: A . ADDITION U/S 40 A(3) / 40(A)(IA) OUT OF TRANSPORTATION EXPENSES OF RS. 50,8 6,238 / - . B . ADDITION U/S 69C ON ACCOUNT OF TRANSPORTATION EXPENSES INCURRED BUT NOT RECORDED IN BOOKS OF ACCOUNTS OF RS. 60,16,800 / - . BUT NOT RECORDED IN BOOKS OF ACCOUNTS OF RS. 60,16,800 / - . C . ADDITION ON ACCOUNT OF HAWALA PURCHASES OF RS. 65,72,840 / - . 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 4 4. THE LEARNED CIT (APPEALS) FURTHER ERRED IN DIRECTING TO MAKE GROSS PROFIT ADDITION OF RS. 1,12,97,400 / - BY ESTIMATING THE GROSS PROFIT AT 4% OF THE TOTAL TURNOVER AS AGAINST GROSS PROFIT SHOWN BY THE APPELLANT AT 2.17% OF TURNOVER. 5. THE LEARNED CIT (APPEALS) FURTHER ERRED IN DIRECTING TO MAKE GROSS PROFIT WITHOUT ISSUING NOTICE OF ENHANCEMENT UNDER SUB SECTION (2) OF SECTION 251 OF THE INCOME TAX ACT, 1961. 4. THE REVENUE IN ITA NO.2171/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF SUPPRESSED PRODUCTION AT RS.1,81,30,471/ - RELYING ON THE DECISION RENDERED BY HON'BLE C E & S TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH, MUMBAI WHICH HAS NEVER REACHED TO FINALITY AND STILL PREMATURE? 2. UNDER THE FAC TS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF WORKING CAPITAL REQUIREMENT FOR SUPPRESSED PRODUCTION U/S. 69C AT RS.29,41,618/ - RELYING ON THE DECISION RENDERED BY HON'BLE C E & S TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH, MUMBAI WHICH HAS NEVER REACHED TO FINALITY AND STILL PREMATURE? 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN RESTRICTING THE ADDITIONS PROPOSED AT RS.1,76,75,878/ - (ON ACCOUNT OF DISALLOWANCE UNDER SE CTION 40A (3) FOR CASH PAYMENTS TOWARDS TRANSPORTATION DISALLOWANCE UNDER SE CTION 40A (3) FOR CASH PAYMENTS TOWARDS TRANSPORTATION EXPENSES AT RS. 50,86,238/ - ,ADDITION UNDER SECTION 69C OF THE IT ACT,1961 ON ACCOUNT OF TRANSPORTATION EXPENSES INCURRED AND NOT RECORDED IN THE BOOKS OF ACCOUNTS AT RS. 60,16,800/ - AND ADDITION ON ACCOUNT OF HAWALA PURCHASES SHOWN AT RS.65,72,840/ - ) AND RESTRICTED THE SAME TO RS.1,12,97,400/ - BY WRONGLY REJECTING BOOK RESULTS AND ESTIMATING GROSS PROFITS, WHEN IN FACT THESE ADDITIONS WERE PROPOSED ON SOUND FOOTINGS AND FOR CONCRETE REASONS. IN DOING SO THE LEARNED CIT(A) OVERLOOKED MATERIAL EVIDENCES BROUGHT ON RECORD IN THE REMAND REPORT. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN MAKING USE OF ESTIMATIONS AS A TOOL TO BYE - PASS MATERIAL EVIDENCES BROUGHT ON RECO RD FOR THE PURPOSES OF CONCRETE ADDITIONS. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE REVENUE ARE COVERED BY THE EARLIER ORDERS OF TRIBUNAL IN ASSESSEES OWN CASE AND THE CIT(A ) HAD ALLOWED THE CLAIM OF ASSESSEE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 5 7. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE ON ACC OUNT OF SUPPRESSED PRODUCTION OF RS. 1,81,30,471/ - , IN TURN, RELYING ON THE ORDER OF CESTAT. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF WORKING CAPITAL REQUIREMENT FOR SUPPRESSED PRODUCTI ON UNDER SECTION 69C OF THE ACT AT RS.29,41,618/ - . 8. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN MANUFACTURE OF MS INGOTS / BILLETS OUT OF VARIOUS SCRAP THROUGH FURNACE. INFORMATION WAS RECEIVED BY THE EXCISE AUTHORITIES IN DECEMBER, 2006 THAT THE ASSESSEE HAD CLANDESTINELY REMOVED FINISHED GOODS WITHOUT PAYMENT OF EXCISE DUTY. THE ASSESSING OFFICER IN VIEW OF THE ABOVE SAID INFORMATION HAD FURTHER TAKEN NOTE OF THE FACT THAT THERE WAS ABNORMAL CONSUMPTION OF ELECTRICITY AND WAS OF T HE VIEW THAT THE PRODUCTION SHOULD BE ESTIMATED ON THE BASIS OF ELECTRICITY UNITS CONSUMED I.E. @ 1026 UNITS PER MT. THE DGCEI HAD ALSO CARRIED OUT INVESTIGATION AND HAD FOUND THE ASSESSEE TO HAVE INDULGED IN ALSO CARRIED OUT INVESTIGATION AND HAD FOUND THE ASSESSEE TO HAVE INDULGED IN CLANDESTINE REMOVAL OF GOODS WITHOUT PAYMENT O F EXCISE DUTY IN EARLIER YEARS . THE SAID EXERCISE WAS CARRIED OUT AGAINST VARIOUS MANUFACTURERS OF TMT BARS AND THE COUNTER PARTIES AND RESPECTIVE PERSONS HAVE FILED PETITION BEFORE THE SETTLEMENT COMMISSION, IN WHICH THEY ADMITTED TO THE CLANDESTINE REMO VAL OF GOODS WITHOUT PAYMENT OF EXCISE DUTY, BUT ASKED FOR WAIVER OF PENALTY, INTEREST AND PROSECUTION. IN VIEW OF THE ABOVE SAID INFORMATION AND BECAUSE OF ERRATIC CONSUMPTION OF ELECTRICITY, THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY PRODU CTION SHOULD NOT BE ESTIMATED ON THE BASIS OF ELECTRICITY CONSUMPTION @ 1026 UNITS PER MT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT PROCEEDINGS AND DETERMINED THE ADDITION ON ACCOUNT OF SUPPRESSED PRODUCTION AT RS. 1,81,30,471/ - . FURTHER, ADDITION W AS MADE ON ACCOUNT OF WORKING CAPITAL REQUIREMENT FOR SUPPRESSED PRODUCTION AT RS. 29,41,618/ - . SIMILAR ADDITION WAS MADE IN THE EARLIER YEARS AND THE MATTER TRAVELLED TO THE TRIBUNAL. IN THIS REGARD, THE TRIBUNAL IN BUNCH OF APPEALS VIDE CONSOLIDATED ORD ER WITH LEAD ORDER IN 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 6 BHAGYALAXMI STEEL ALLOYS PVT. LTD. VS. ADDL. CIT , RELATING TO ASSESSMENT YEARS 2006 - 07 TO 2008 - 09, DATED 15.07.2015 AND CORRIGENDUM ORDER DATED 1 7 .02.2016 CONFIRMED THE ADDITION ON ACCOUNT OF ADDITIONAL INCOME IN THE HANDS OF ASSESSEE @ 4% OR ACTUAL GP DECLARED BY THE ASSESSEE, WHICHEVER IS HIGHER, ON THE VALUE OF SUCH CLANDESTINE REMOVAL OF MATERIAL AS ADMITTED BY THE ASSESSEE. THE TRIBUNAL FURTHER DELETED THE ADDITION MADE ON ACCOUNT OF WORKING CAPITAL REQUIREMENT MADE UNDER SECTION 69C OF THE ACT. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT THERE WAS NO INVESTIGATION BY THE DGCEI DURING THE YEAR UNDER CONSIDERATION AND FURTHER THERE WAS NO INVESTIGATION WAS CARRIED OUT BY EXCISE AUTHORITIES OR BY THE ASSESSING OFFICER. FURTHER, THE ASSESSEE HAS ALSO NOT FILED ANY PETITION BEFORE SETTLEMENT COMMISSION ADMITTING TO HAVE REMOVED THE GOODS CLANDESTINELY WITHOUT PAYMENT OF EXCISE DUTY FOR THE YEAR UNDER CONSIDERATION. IN VIEW THEREOF, THE ASSESSEE PAYMENT OF EXCISE DUTY FOR THE YEAR UNDER CONSIDERATION. IN VIEW THEREOF, THE ASSESSEE THU S, CLAIMED THAT THERE IS NO MERIT IN GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE REVENUE. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 1 1 . WE FIND THAT T HE TRIBUNAL IN ASSESSEES OWN CASE I N ITA NOS. 142 TO 146 /PN/2012 AND CROSS APPEALS IN ITA NOS. 631 TO 635 /PN/2012, RELATING TO ASSESSMENT YEARS 200 4 - 0 5 TO 2008 - 09 VIDE ORDER DATED 15.07.2015 HAD CONSIDERED THE ISSUE AT LENGTH VIDE PARAS 26 TO 58 AND VIDE PARAS 59 AND 60 , THE TRIBUNAL HAD DELE TED THE ADDITION ON BOTH COUNTS I.E. ADDITION MADE ON ACCOUNT OF SUPPRESSED PRODUCTION AND ALLEGED INVESTMENT IN PURCHASES, WHICH READ AS UNDER: - 59. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE HOLD THAT NO EXTRAPOLATION OF SALES FOR 30 0 DAYS CAN BE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE EVIDENCE FOUND FOR CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 7 EXCISE DUTY FOR FEW DAYS, WHICH IN TURN, HAS BEEN ADMITTED BY THE ASSESSEE BY WAY OF FILING PETITION BEFORE THE SETTLE MENT COMMISSION, WHICH IN TURN, HAS ALSO BEEN ACCEPTED BY THE SETTLEMENT COMMISSION. MERELY BECAUSE THE SETTLEMENT COMMISSION ACCEPTED THE CLAIM OF THE ASSESSEE OF ADDITIONAL EXCISE DUTY PAYABLE ON THE SAID CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY DOES NOT ESTABLISH THE CASE OF THE REVENUE THAT THE SAID FIGURES OF ADDITIONAL PRODUCTION SHOULD BE UTILIZED FOR EXTRAPOLATING THE SALES IN THE HANDS OF THE ASSESSEE FOR THE ENTIRE YEAR. ADMITTEDLY, THE ASSESSEE HAD OFFERED ADDITIONAL INCOM E ON THE SAID CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, WHICH IS TO BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT IN CASE THE SAID ADDITIONAL INCOME HAS N OT BEEN ADDED WHILE COMPUTING THE INCOME IN THE HANDS OF THE ASSESSEE FOR THE RESPECTIVE YEARS, THE SAME MAY BE DIRECTED TO BE ADDED IN THE HANDS OF THE RESPECTIVE ASSESSEE IN RESPECTIVE YEARS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY FROM T HE RECORDS FOR THE RESPECTIVE YEARS AND INCLUDE THE ADDITIONAL INCOME ON ACCOUNT OF SUCH ADMITTED CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, BY THE ASSESSEE EITHER BEFORE THE SETTLEMENT COMMISSION OR BEFORE THE EXCISE AUTHORITIES, IN T HE HANDS OF THE ASSESSEE. WE HAVE HEARD BUNCH OF APPEALS AND IN SOME YEARS, THERE IS NO ADMISSION OF CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY AND IN THOSE YEARS IN THE ABSENCE OF ANY EVIDENCE AND / OR ANY INVESTIGATION OR INQUIRY MAD E BY THE ASSESSING OFFICER AND WHERE THE ASSESSING OFFICER HAS FAILED TO COLLECT ADDITIONAL EVIDENCE, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE, BY WAY OF EXTRAPOLATION OF SALES FOR 300 DAYS ON ACCOUNT OF ANY EVIDENCE FOUND IN ANY PRECEDING OR S UCCEEDING YEARS. FURTHER, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE, WHERE NO PETITION HAS BEEN FILED BY THE ASSESSEE BEFORE THE SETTLEMENT COMMISSION IN ANY OF THE RESPECTIVE YEARS OR BEFORE THE EXCISE AUTHORITIES. IN THE CASE OF BHAGYALAXMI STEEL ALLOYS PVT. LTD., THERE IS NO INVESTIGATION BY DGCEI AND HENCE, NO ADDITION ON ACCOUNT OF EXTRAPOLATION CAN BE MADE, IN THE ABSENCE OF ANY EVIDENCE FOUND AGAINST THE ASSESSEE. 60. SINCE WE HAVE DELETED THE ADDITION IN THE HANDS OF ASSESSEE ON BOTH ACCOUNTS I.E. ADDITION MADE ON ACCOUNT OF ERRATIC CONSUMPTION OF ELECTRICITY AND ADDITION PROPOSED ON THE BASIS OF EVIDENCE FOUND FOR THE PART OF THE YEAR OF CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, NEXT ADDITION MADE IN THE HANDS O F THE ASSESSEE I.E. ALLEGED INVESTMENT IN THE PURCHASES FOR EFFECTING SUCH SALES WHICH GOODS HAVE BEEN CLANDESTINELY REMOVED, IS NOT SUSTAINABLE. ACCORDINGLY, WE HOLD THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF ALLEGED INVESTME NT IN PURCHASES UNDER SECTION 69C OF THE ACT. 1 2 . THEREAFTER, CORRIGENDUM ORDER WAS PASSED BY THE TRIBUNAL SUBSTITUTING PARA 59 OF THE TRIBUNAL VIDE ORDER DATED 17.02.2016 AND IT WAS HELD AS UNDER: - 3. ON PERUSAL OF THE RECORD, WE FIND THAT BY AN ERROR , THE FINDINGS OF THE TRIBUNAL IN PARA 59 WITH SPECIAL REFERENCE TO FROM LINE 17 TO 21, NEEDS CORRECTION TO THE EXTENT THAT THE ADDITIONAL INCOME TO BE ADDED IN THE HANDS OF THE ASSESSEE IS EQUIVALENT TO PROFITS ON SUPPRESSED PRODUCTION @ 4% OR ACTUAL GP R ATE DECLARED BY THE ASSESSEE WHICHEVER WAS HIGHER. IN VIEW THEREOF, WE PASS THIS CORRIGENDUM ORDER AND THE PARA 59 I.E. FROM LINE 17 TO 21 WOULD NOW BE SUBSTITUTED BY FOLLOWING PARA. 59. .ADMITTEDLY, THE ASSESSEE HAD OFFERED ADDITIONAL INCOME ON THE S AID CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, WHICH IS TO BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT IN CASE THE SAID ADDITIONAL INCOME HAS NOT BEEN AD DED WHILE COMPUTING THE INCOME IN THE HANDS OF THE ASSESSEE FOR THE RESPECTIVE YEARS, THE SAME MAY BE DIRECTED TO BE ADDED IN THE HANDS OF THE RESPECTIVE ASSESSEE IN RESPECTIVE YEARS. ACCORDINGLY, WE DIRECT 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 8 THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS FOR THE RESPECTIVE YEARS AND INCLUDE THE ADDITIONAL INCOME ON ACCOUNT OF SUCH ADMITTED CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, BY THE ASSESSEE EITHER BEFORE THE SETTLEMENT COMMISSION OR BEFORE THE EXCISE AUTHORITIES, IN THE HANDS O F THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS FOR THE RESPECTIVE YEARS AND INCLUDE IN THE HANDS OF ASSESSEE, THE ADDITIONAL INCOME @ 4% OR ACTUAL G.P. RATE DECLARED BY THE ASSESSEE FOR THAT YEAR, WHICHEVER IS HIGH ER, ON VALUE OF SUCH ADMITTED CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, BY THE ASSESSEE BEFORE THE EXCISE AUTHORITIES. THUS, THE ASSESSEE IS DIRECTED TO FILE THE REQUISITE DETAILS OF PROCEEDINGS BEFORE THE EXCISE AUTHORITIES, BEFORE THE ASSESSING OFFICER IN ORDER TO COMPUTE THE ADDITIONAL INCOME IN THE HANDS OF ASSESSEE IN THE RESPECTIVE YEARS. 1 3 . THE ISSUE ARISING BEFORE US IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA). FURTHER, DURING THE YEAR UNDER C ONSIDERATION, NEITHER INVESTIGATION BY THE DGCEI NOR ANY SUPPRESSED PRODUCTION HAS BEEN DETECTED AND ADMITTED BY THE ASSESSEE. FURTHER, THE ASSESSEE HAS NOT MOVED ANY PETITION BEFORE THE SETTLEMENT COMMISSION OR ANY OTHER EXCISE AUTHORITIES. IN THE TOTAL ITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES AND IN THE ABSENCE OF ANY EVIDENCE COLLECTED BY THE ASSESSING OFFICER OF ALLEGED REMOVAL OF GOODS WITHOUT PAYMENT OF EXCISE DUTY, MERELY ASSESSING OFFICER OF ALLEGED REMOVAL OF GOODS WITHOUT PAYMENT OF EXCISE DUTY, MERELY ON THE BASIS OF ESTIMATION OF ALLEGED SUPPRESSED PRODUCTION IN THE EARLIE R YEARS, THERE IS NO MERIT IN MAKING ANY ADDITION IN THE HANDS OF ASSESSEE. THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 15.07.2015 WITH LEAD ORDER IN BHAGYALAXMI STEEL ALLOYS PVT. LTD. VS. ADDL. CIT (SUPRA) HAS DELETED THE ADDITION MADE IN THE HA NDS OF ASSESSEE ON ACCOUNT OF ALLEGED SUPPRESSION OF PRODUCTION. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF SUPPRESSED PRODUCTION. 1 4 . IN VIEW OF DELETING THE ADDITION O N ACCOUNT OF SUPPRESSED PRODUCTION, THERE IS NO MERIT IN ANY ADDITION BEING MADE ON ACCOUNT OF WORKING CAPITAL REQUIRED FOR ALLEGED PRODUCTION. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE REVENUE ARE THUS, DISMISSED. 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 9 1 5 . THE ASSESSEE IN ITS APPEAL IS AGGRIEVED BY REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT AND FURTHER ESTIMATION OF GROSS PROFIT @ 4% OF TOTAL SALES, RESULTING IN ADDITION OF RS. 1,12,97,400/ - . THE ASSESSEE HAS ALSO RAISED THE PLEA THAT THE CIT(A) HAD ERRED IN ENHANCING THE INCOME WITHOUT ISSUING NOTICE OF ENHANCEMENT. 1 6 . BRIEFLY, IN THE FACTS RELATING TO THE ISSUE, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2010 - 11 HAD DETERMINED THE TOTAL INCOME OF ASSESSEE AT RS. 2,79,04,680/ - . THE FIRST ADDITION MADE IN THE CASE OF ASSESSEE WAS ON ACCOUNT OF SUPPRESSED PRODUCTION AND THE SECOND ADDITION WAS MADE ON ACCOUNT OF WORKING CAPITAL REQUIREMENT FOR SUCH SUPPRESSED PRODUCTION. WE HAVE ALRE ADY DEALT WITH THE SAID TWO ADDITIONS WHILE ADJUDICATING THE APPEAL FILED BY THE REVENUE I.E. GROUNDS OF APPEAL NO.1 AND 2. THE THIRD ADDITION MADE BY THE ASSESSING OFFICER WAS UNDER SECTION 40A(3) OF THE ACT TOWARDS TRANSPORTATION EXPENSES OF RS. 50,86,23 8/ - . THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF ASSESSING OFFICER RS. 50,86,23 8/ - . THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF ASSESSING OFFICER BEFORE THE CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS, REMAND REPORT WAS SOUGHT FROM THE ASSESSING OFFICER AGAINST THE SUBMISSIONS OF ASSESSEE AND FOR ADMISSION OF ADDITIONA L GROUND OF APPEAL. THE ASSESSING OFFICER IN THE REMAND REPORT DATED 02.09.2014 RECOMMENDED FURTHER ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE I.E. ADDITION UNDER SECTION 69C OF THE ACT ON ACCOUNT OF TRANSPORTATION EXPENSES INCURRED BUT NOT RECORDED IN BOOKS OF ACCOUNT OF RS. 60,16,800/ - AND ADDITION ON ACCOUNT OF HAWALA PURCHASES OF RS. 65,72,840/ - AS AGAINST THE ADDITION MADE IN THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT OF RS. 50,86,238/ - . THE ASSESSING OFFICER IN THE REMAND REPORT PROPOSED AN AD DITION TOTALING RS. 1,76,75,878/ - . THE ASSESSEE FURNISHED A REPLY AGAINST THE SAID PROPOSAL WHICH IS INCORPORATED UNDER PARA 10.6 AT PAGES 19 TO 22 OF THE APPELLATE ORDER. THE CIT(A) VIDE PARA 10.7 NOTES THAT THE ASSESSEE HAD CLAIMED TRANSPORTATION EXPEND ITURE TO THE EXTENT OF RS. 2,54,06,190/ - DURING THE YEAR AND SIMILAR EXPENSES WERE CLAIMED IN THE EARLIER YEARS ALSO. THOUGH, IT 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 10 WAS UNDISPUTED THAT THE BUSINESS OF STEEL MANUFACTURING REQUIRE S SUBSTANTIAL TRANSPORTATION COST, BUT THE ASSESSING OFFICER NOT ED THAT THE ASSESSEE HAD NOT MAINTAINED PROPER RECORDS IN RESPECT OF TRANSPORTATION EXPENSES ACTUALLY INCURRED. SUB STANTIAL PART OF EXPENDITURE WAS DEBITED TOWARDS A SINGLE TRUCK OWNER, WHICH AS PER THE ASSESSING OFFICER WAS NOT POSSIBLE. FURTHER, THE AS SESSEE HAD NOT RECORDED TRANSPORTATION EXPENSES TO THE EXTENT OF RS. 60,16,800/ - IN ITS BOOKS OF ACCOUNT. IN THIS REGARD, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED THE TRANSPORTATION EXPENSES WITHOUT MAINTAINING PROPER RECORDS AND WITHOU T RECORDING ACTUAL ENTRIES OF TRANSPORTATION IN THE BOOKS OF ACCOUNT. ANOTHER POINT NOTED BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS WAS THAT THE ASSESSEE HAD PURCHASED RAW MATERIAL I.E. SPONGE IRON AMOUNTING TO RS. 65,72,840/ - , WHICH WAS NOT ACTUA L PURCHASE, BUT WAS HAWALA PURCHASES NOT SUPPORTED BY EVIDENCE LIKE LORRY RECEIPT, WEIGHMENT SLIP, DELIVERY CHALLAN, ETC. IN VIEW OF THE ABOVE SAID DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT, THE REJECTION OF BOOKS OF ACCOU NT OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT, THE REJECTION OF BOOKS OF ACCOU NT UNDER SECTION UNDER SECTION 145(3) OF THE ACT WAS HELD TO BE JUSTIFIED BY THE CIT(A). ONCE THE BOOKS OF ACCOUNT WERE REJECTED, THE CIT(A) WAS OF THE VIEW THAT THE INCOME OF ASSESSEE WAS TO BE ESTIMATED BY ESTIMATING REASONABLE PERCENTAGE OF GROSS PROFI T CONSIDERING THE TOTALITY OF THE FACTS. THE CIT(A) FURTHER NOTICED THAT THE ASSESSING OFFICER HAD ESTIMATED THE ADDITION UNDER SECTION 40A(3) OF THE ACT AT 20% OF TOTAL TRANSPORTATION EXPENDITURE, BY ASSUMING THAT 20% HAD BEEN INCURRED IN CONTRAVENTION O F SECTION 40A(3) OF THE ACT. THE CIT(A) REFERRED TO THE AUDITED MANUFACTURING AND TRADING ACCOUNT AND PROFIT & LOSS ACCOUNT OF THE ASSESSEE AND NOTED THAT THE ASSESSEE HAD SHOWN GROSS PROFIT @ 2.17% OF THE SALES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THE WRITTEN SUBMISSIONS ADMITTED THAT VARIOUS STEEL MANUFACTURERS IN JALNA AND SURROUNDING AREAS HAD ACCEPTED THE ESTIMATION OF GROSS PROFIT @ 2.5%. HOWEVER, IN VIEW OF PECULIARITY OF THE FACTS AND CIRCUMSTANCES, THE GROSS PROFIT IN THE H ANDS OF ASSESSEE WAS ESTIMATED AT 4% OF THE TURNOVER I.E. 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 11 RS. 61,92,25,302/ - , WHICH WORKED OUT TO RS.2,47,71,012/ - . THE ASSESSEE HAD DECLARED PROFIT OF RS. 1,34,73,612/ - AND THE BALANCE WAS ADDED AS INCOME OF THE ASSESSEE I.E. RS. 1,12,97,400/ - . THE ASSESSI NG OFFICER HAD RECOMMENDED THE ADDITION TO THE EXTENT OF RS. 1,76,75,878/ - . THE CIT(A) DIRECTED THE ASSESSING OFFICER TO MAKE ADDITION OF RS.1,12,97,400/ - , AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. THE REVENUE VIDE GROUND OF APPEAL NO.3 IS AGGRIE VED IN RESTRICTING THE ADDITION . 1 7 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AFTER TAKING US THROUGH THE FACTUAL ASPECTS OF THE CASE, POINTED OUT THAT SIMILAR ADDITION ON THREE COUNTS AND THEN, THE ESTIMATION OF PROFITS IN THE HANDS OF ASSE SSEE HAS BEEN MADE BY THE ASSESSING OFFICER. THOUGH, ALL THESE ADDITIONS ARE AGITATED, BUT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STATED THAT ENDS OF JUSTICE WOULD BE MET IN CASE THE ESTIMATION OF GROSS PROFIT BY APPLYING GP RATE OF 4% IS SCALED DOWN TO 2.5%. IT WAS PUT TO THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AS TO WHERE THE ADDITIONAL TO THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AS TO WHERE THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE HAVING BEEN CONFRONTED TO THE ASSESSING OFFICER AND THE REMAND PORT RECEIVED THEREIN, COPY OF WHICH WAS ALS O GIVEN TO THE ASSESSEE, WHO IN TURN, FILED ITS RE JOINDER , THEN THERE IS NO QUESTION OF NON - GRANT OF OPPORTUNITY BY THE CIT(A) BY WAY OF ENHANCEMENT NOTICE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD NO REPLY ON THE SAID QUERY. 1 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE VEHEMENTLY STRESSED THAT THERE IS NO MERIT IN ESTIMATION OF GROSS PROFIT IN THE HANDS OF ASSESSEE AND THE ADDITIONS SHOULD BE MADE ON ACCOUNT OF DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER ON THREE COUNTS I.E. DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, ADDITION UNDER SECTION 69C OF THE ACT ON ACCOUNT OF TRANSPORTATION EXPENSES INCURRED, NOT REVEALED ANY BOOKS OF ACCOUNT AND ADDITION ON ACCOUNT OF HAWALA PURCHASES. 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 12 1 9 . WE HAVE HEARD THE RIVAL C ONTENTIONS AND PERUSED THE RECORD. THE APPEAL OF THE ASSESSEE IS ON THE AFORESAID ISSUE AND THE REVENUE IS IN APPEAL VIDE GROUND OF APPEAL NO.3 AGAINST THE ORDER OF CIT(A) IN RESTRICTING THE ADDITION PROPOSED AT RS. 1,76,75,878/ - TO RS. 1,12,97,400/ - . THE FIRST ASPECT WHICH HAS TO BE CONSIDERED IN THE CASE OF ASSESSEE IS THAT THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS NOTED CERTAIN DISCREPANCIES IN THE TRANSPORTATION ACCOUNT OF THE ASSESSEE. THE TOTAL TRANSPORTATION EXPENSES DEBITED BY THE ASSESSEE WE RE TO THE TUNE OF RS.2.54 CRORES, OUT OF WHICH, THE MAJORITY OF EXPENSES WERE DEBITED TOWARDS SINGLE TRUCK OWNER, WHICH ADMITTEDLY, WAS NOT POSSIBLE. HENCE, THE SAID EXPENDITURE ON TRANSPORTATION WAS NOT ACCEPT ED , IN VIEW OF THE DISCREPANCIES IN THE ACCOU NTS. FURTHER, THE ASSESSING OFFICER HAS ALSO POINTED OUT THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON TRANSPORTATION TO THE EXTENT OF RS. 60,16,800/ - , WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. ANOTHER ISSUE NOTED BY THE ASSESSING OFFICER WAS T HAT THE ASSESSEE HAD PURCHASED RAW MATERIAL I.E. SPONGE IRON AMOUNTING TO RS.65,72,840/ - , WHICH WAS NOT ACTUAL PURCHASE, BUT HAWALA SPONGE IRON AMOUNTING TO RS.65,72,840/ - , WHICH WAS NOT ACTUAL PURCHASE, BUT HAWALA PURCHASE. IN THIS REGARD, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS STRESSED BEFORE US THAT THE PURCHASES MADE BY THE ASSESSEE WERE ACCOUNTED FOR AND NO HAWALA PURCHASES WERE MADE . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD MADE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT BECAUSE SUBSTANTIAL TRANSPORTATION PAYMENTS WERE MADE IN CASH TO ONE SINGLE TRU CK OWNER BY BIFURCATING THE AMOUNT. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ADDITION PROPOSED ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT AMOUNTING TO RS. 50,86,238/ - , ADDITION UNDER SECTION 69C OF THE ACT FOR NO N - RECORDING OF TRANSPORTATION EXPENSES AT RS. 60,16,800/ - AND RECOMMENDATION BY THE ASSESSING OFFICER ON ACCOUNT OF PURCHASES OF RS. 65,72,840/ - , THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE CANNOT BE RELIED UPON AND THE SAME MERITS TO BE REJECTED. ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THEN THE NEXT STEP IS TO ESTIMATE THE GROSS PROFIT IN THE HANDS OF ASSESSEE. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD DECLARED GP RATE OF 2.18%, AGAINST 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 13 WHICH THE CIT(A) ESTIMATED GP RATE @ 4% RESULTING IN ADDIT ION OF RS. 1,12,97,400/ - . IT MAY BE POINTED OUT HEREIN ONLY THAT ON ACCOUNT OF DISCREPANCIES IN THE ACCOUNTS OF TRANSPORTATION, SOME OF PURCHASES, THE GP RATE HAS BEEN PROPOSED ON THE TOTAL SALES UNDERTAKEN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND WHICH WORKED OUT RS.2,47,71,012/ - AND ASSESSEE HAD DECLARED PROFIT OF RS. 1,34,73,612/ - , HENCE, THE ADDITION OF RS. 1,12,97,400/ - . THE ASSESSEE IN THE WRITTEN SUBMISSIONS WITHOUT PREJUDICE AND STRICTLY IN THE ALTERNATE, HAS PROPOSED THAT ENDS OF JUSTICE WOULD BE MET IN CASE THE GROSS PROFIT RATE @ 2.5% IS APPLIED TO DETERMINE THE ADDITIONAL INCOME IN THE HANDS OF ASSESSEE. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE FIND NO MERIT IN THE SAME AND WE ARE OF THE VIEW THAT THE GP RATE OF 3 % BE APPLIED TO DETERMINE THE ADDITIONAL INCOME IN THE HANDS OF ASSESSEE. AT THIS JUNCTURE, IT MAY BE POINTED OUT THAT WHILE PASSING THE EARLIER ORDER IN THE CASE OF ASSESSEE, THE GP RATE OF 4% OR HIGHER, IF ANY, WAS DIRECTED TO BE APPLIED ON THE ADMISSIO N MADE BY THE ASSESSEE IN RESPECT OF VALUE OF CLANDESTINE REMOVAL OF GOODS WITHOUT PAYMENT OF ASSESSEE IN RESPECT OF VALUE OF CLANDESTINE REMOVAL OF GOODS WITHOUT PAYMENT OF EXCISE DUTY. HOWEVER, WHILE APPLYING THE GP RATE ON TOTAL SALES, WE DIRECT THE ASSESSING OFFICER TO ESTIMATE ADDITIONAL INCOME IN THE HANDS OF ASSESSEE @ 3%. 2 0 . BEFORE CONCLUDING, WE MAY ALSO ADDRESS THE LAST GROUND OF APPEAL RAISED BY THE ASSESSEE AGAINST ENHANCEMENT CARRIED OUT BY THE CIT(A). THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE CIT(A) HAD NOT GIVEN A NOTICE OF ENHANCEMENT, HENCE, THE ADDITION WAS NOT WARRANTED. HOWEVER, AS REFERRED TO BY US IN THE PARAS HEREINABOVE, THE ADDITION ON CERTAIN ISSUES WAS PROPOSED BY THE ASSESSING OFFICER IN THE REMAND REPORT, AGAINST WHICH THE CIT(A) ALLOWED AN OPPORTUNITY TO THE ASSESSEE TO SHOW CAUSE AND REBUT THE SAME AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE ADDITION WAS NOT MADE ON ACCOUNT OF EACH OF THE DISALLOWANCES, BUT BY ADOPTING THE GP RATE ON THE TOTAL SALES DECLARED BY THE ASSESSEE. THE ASSESSEE BY WAY OF WRITTEN SUBMISSIONS HAD AGITATED THAT NO ADDITION COULD BE MADE ON THE BASIS OF NEW ISSUES, BUT THE 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 14 LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WHILE CONCLUDING THE ARGUMENTS RELIED ON THE ALTERNATE PLEA RAISED IN THIS REGARD BY WAY OF PARA 4.27 OF THE WRITTEN NOTE, WHEREIN, SUGGE STION WAS MADE THAT AFTER REJECTION OF BOOKS OF ACCOUNT, IN CASE ANY GP ADDITION IS TO BE ESTIMATED, THEN THE SAME SHOULD BE @ 2.5% OF THE TURNOVER. WE HAVE ALREADY ACCEPTED THE ALTERNATE PLEA OF THE ASSESSEE AND HAS DIRECTED THAT THE GP SHOULD BE ESTIMAT ED @ 3% OF TOTAL TURNOVER AND IN VIEW THEREOF, THERE IS NO MERIT IN THE CLAIM OF ASSESSEE VIS - - VIS ENHANCEMENT BY THE CIT(A) AND THE SAME IS REJECTED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED AND THE GROUND OF APPEAL NO.3 RAI SED BY THE REVENUE IS REJECTED. 2 1 . NOW, COMING TO THE APPEAL OF ASSESSEE IN ITA NO.2181/PN/2014, RELATING TO ASSESSMENT YEAR 2011 - 12. 2 2 . THE ISSUE RAISED IN THE SAID APPEAL IS IDENTICAL TO THE ISSUE IN ITA NO.1886/PN/2014 I.E. AGAINST REJECTION OF BOOK S OF ACCOUNT AND ESTIMATION OF GP @ 4% OF THE TOTAL TURNOVER. FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE REJECTION OF BOOKS OF ACCOUNT AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE INCOME OF ASSESSEE @ 3%. THE GROUND OF APPEAL NO.4 RAISED B Y THE ASSESSEE AGAINST NON - ISSUANCE OF NOTICE OF ENHANCEMENT IS AS IN THE EARLIER YEARS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 2 3 . SIMILARLY, GROUND OF APPEAL NO.2 RAISED BY THE REVENUE IN ESTIMATING THE ADDITION BY APPL YING THE GP RATE BY THE CIT(A) IS ALSO DISMISSED. 2 4 . NOW, COMING TO THE BALANCE GROUNDS OF APPEAL RAISED BY THE REVENUE, WHEREIN GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF SUPPRESSION PRODUCTION AT RS.6 9,97,309/ - . THE ISSUE RAISED IS IDENTICAL TO 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 15 THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IN ASSESSMENT YEAR 2010 - 11 AND OUR DECISION SHALL APPLY MUTATIS MUTANDIS . 2 5 . ANOTHER ISSUE RAISED IN THE PRESENT APPEAL BY WAY OF GROUND OF APPEAL NO .3 IS AGAINST DELETION OF ADDITION MADE UNDER SECTION 41(1) OF THE ACT. THE GROUND OF APPEAL NO.3 READS AS UNDER: - 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 41(1) OF THE INCOME - T AX ACT, 1961 AT RS.37,53,630/ - ? 2 6 . BRIEFLY, THE FACTS RELATING TO THE ISSUE ARE THAT, THE ASSESSING OFFICER ON PERUSAL OF BALANCE SHEET NOTED THAT CERTAIN SUNDRY CREDITORS WERE OUTSTANDING FOR A LONGER PERIOD AND THE SAME SHOULD BE TREATED AS CESSATION OF LIABILITY UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER IN THIS REGARD WAS RS.37,53,630/ - AS DUE FROM THIRD PARTIES WHICH WERE DUE FROM ASSESSMENT YEAR 2006 - 07 ONWARDS. THE ASSESSEE WAS ASKED TO PRO DUCE THE CONFIRMATION AND COMPLETE ADDRESS OF THE SUNDRY CREDITORS. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY INFORMATION AND ADDITION OF RS.37,53,630/ - WAS MADE BY THE ASSESSING OFFICER. 2 7 . THE CIT(A) NOTED THE CONTENTION OF ASSESSEE THAT THE SAID AMOUNTS WERE STILL OUTSTANDING AND THE LIABILITY WAS STILL PAYABLE, WHICH HAD NEITHER BEEN WRITTEN OFF BY THE ASSESSEE NOR THE CREDITORS AND HENCE, NO MERIT IN THE ADDITION MADE UNDER SECTION 41(1) OF THE ACT. THE CIT(A) IN TURN, RELIED ON THE RATIO LAID DOWN IN ACIT VS. GOPAL FABRICS IN ITA NO.3338/AHD/2010 & 463/AHD/2013, ORDER DATED 29.11.2013 AND DELETED THE AFORESAID ADDITION. THE CIT(A) FURTHER NOTED THAT BOOKS OF ACCOUNT OF ASSESSEE HAD BEEN REJECTED UNDER SECTION 145 OF THE ACT AND GROSS PROFIT AD DITION HAD BEEN MADE WHICH WAS MUCH MORE THAN THE ABOVE ADDITION AND HENCE, NO JUSTIFICATION FOR MAKING THE AFORESAID DISALLOWANCES. 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 16 2 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD AND FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQU ARELY COVERED BY THE ORDER OF AHMEDABAD BENCH OF TRIBUNAL IN ACIT VS. GOPAL FABRICS (SUPRA) AND DCIT VS. THAKKAR DEVELOPERS (2008) 115 TTJ 841 (PUNE). THE HONBLE BOMBAY HIGH COURT IN CIT VS. CHESS BRIGHT STEEL LTD. (1989) 177 ITR 128 (BOM) HAD LAID DOWN THE PROPOSITION THAT THE LIABILITY OF ASSESSEE DOES NOT CEASE MERELY BECAUSE THE LIABILITY HAS BECOME BARRED BY LIMITATION AND NO LIABILITY WAS CHARGEABLE TO TAX UNDER SECTION 41(1) OF THE ACT. THE ASSESSEE H AS RECOGNIZED HIS LIABILITY TO PAY SUNDRY CREDI TORS TO THE EXTENT OF RS. 36,53,630/ - . ALL THESE AMOUNTS WERE BROUGHT FORWARD FROM THE EARLIER YEAR S AND THERE WAS NO MOVEMENT IN THE SAID ACCOUNTS. BOTH THE ASSESSEE AND THE CREDITORS HAD NOT WRITTEN OFF OF THE SAID AMOUNT AND IN VIEW OF VARIOUS DECISION S ON THE ISSUE, THERE IS NO JUSTIFICATION FOR INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT MERELY BECAUSE THE LIABILITY WAS OUTSTANDING FOR SOME TIME. ACCORDINGLY, WE FIND NO MERIT IN THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE AND THE SAME IS DISMISSED. THE GROUND OF APPEAL NO.3 RAISED BY THE REVENUE AND THE SAME IS DISMISSED. 2 9 . THE ASSESSEE IN ITA NO.1885/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INC OME OR CONCEALED PARTICULARS OF INCOME IN RESPECT OF ALLEGED SUPPRESSION OF PRODUCTION AND CONSEQUENTIAL ADDITION. 2. THE LEARNED CIT(APPEALS) FURTHER ERRED IN CONFIRMING THE PENALTY OF RS. 1 , 86 , 860 / - LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961. 30 . THE ISSUE RAISED IN THE APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT RS. 1 , 86 , 860 / - . 3 1 . BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF TMT BARS. INFORMATION WAS RECEIVED FROM THE OFFICE OF CENTRAL EXCISE & CUSTOMS, AURANGABAD THAT THE ASSESSEE HAD INDULGED IN MANUFACTURE OF FINISHED 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 17 GOODS AND ITS REMOVAL WITHOUT PAYING EXCISE DUTY. AN ADJUDICATION ORDER WAS PASSED BY CCE, AURANGABAD QUANTIFYING THE VALUE OF SUPPRESSED PRODUCTION O R EXCISE EVASION. FURTHER, IN VESTIGATION WAS ALSO DONE BY THE DGCEI I.E. DIRECTOR GENERAL OF CENTRAL EXCISE INTELLIGENCE, WHEREIN THE ASSESSEE ADMITTED TO HAVE CLANDESTINELY REMOVED FINISHED GOODS WITHOUT PAYMENT OF EXCISE DUTY. IN THIS REGARD, THE ASSES SEE MADE A PETITION BEFORE THE CENTRAL EXCISE AND CUSTOMS SETTLEMENT COMMISSION FOR WAIVER OF PENALTY, INTEREST AND PROSECUTION. THE ASSESSEE MADE THE PAYMENT OF EXCISE DUTY AVOIDED IN ACCORDANCE WITH NOTICES ISSUED BY DGCEI. IN VIEW OF THE ABOVE SAID IN FORMATION, THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT. THEREAFTER, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DETERMINING THE TOTAL INCOME AT RS.1 4 , 63 , 5 5,1 27 / - AS AGAINST RETURN ED INCOME OF RS.1 6 , 01 , 52 0/ - . PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED AGAINST THE ASSESSEE. THE CIT(A) PARTLY CONFIRMED THE ADDITIONS BY RESTRICTING AGAINST THE ASSESSEE. THE CIT(A) PARTLY CONFIRMED THE ADDITIONS BY RESTRICTING SUPPRESSION OF PRODUCTIO N TO 4% OF SUPPRESSED SALE AMOUNTING TO RS. 57 , 90 , 144 / - . THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE CONCEALED THE PARTICULARS OF INCOME TO THE EXTENT OF RS. 57 , 90 , 144 / - ON ACCOUNT OF SUPPRESSED PROFIT ON UNACCOUNTED MANUFACTURING AND SALE OF PRODUCTS A ND ALSO INITIAL UNDISCLOSED INVESTMENT REQUIRED FOR THE SAME. PENALTY UNDER SECTION 271(1)(C) OF THE ACT OF RS.1 9 , 45 , 488 / - WAS LEVIED UPON THE ASSESSEE BY THE ASSESSING OFFICER . 3 2 . THE CIT(A) DELETED THE PENALTY ON THE ADDITIONS MADE ON ACCOUNT OF SUP PRESSED PRODUCTION. HOWEVER, IN RESPECT OF ADMISSION MADE BEFORE THE DGCEI OR THE CESTAT ABOUT THE CLANDESTINE REMOVAL OF GOODS I.E. TO THE EXTENT OF 217 MT OF TMT BARS ON WHICH THE PROFIT WORKED OUT TO RS.1, 58 , 612 / - , THE PENALTY UNDER SECTION 271(1)(C) O F THE ACT WAS CONFIRMED. FURTHER, ADDITION WAS MADE ON ACCOUNT OF WORKING CAPITAL REQUIRED FOR THE ABOVE MENTIONED UNDISCLOSED PRODUCTION I.E. 10% OF SALE EQUIVALENT TO 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 18 RS. 3 , 96 , 530 / - . THE CIT(A) THUS, RESTRICTED PENALTY UNDER SECTION 271(1)(C) OF THE ACT TO RS. 1 , 86 , 860 / - . 3 3 . THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 3 4 . THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE ADDITION ON ACCOUNT OF CLANDESTINE REMOVAL OF TMT BARS, WHICH HAD BEEN AGREED UPON BEFORE THE EXCISE AUTHORITIES, WAS ONLY T O PURCHASE PEACE OF MIND AND TO AVOID LITIGATION. HE FURTHER STATED IN THE ABSENCE OF ANY INVESTIGATION CARRIED ON BY THE ASSESSING OFFICER, THERE WAS NO EVIDENCE OF ANY SALES OUTSIDE THE BOOKS OF ACCOUNT AND HENCE, THERE WAS NO JUSTIFICATION FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 3 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF CIT(A). 3 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ADDITION IN THE HANDS OF ASSESSEE WAS MADE BECAUSE OF INVESTIGATION CARRIED OUT BY THE EXCISE AUTHORITIES. PURSUANT TO THE ACTION UNDERTAKEN BY THE DGCEI, THE ASSESSEE CONFESSED AND ADMITTED TO CLANDESTINE REMOVAL OF FINISHED GOODS WITHOUT PAYMENT OF EXCISE DUTY AND IN THIS RE GARD, FILED A PETITION BEFORE THE CENTRAL EXCISE AND CUSTOMS SETTLEMENT COMMISSION FOR WAIVER OF PENALTY, INTEREST AND PROSECUTION. THE PETITION WAS ADMITTED AND DISPOSED OFF. HOWEVER, PENALTY WAS LEVIED UPON THE ASSESSEE IN ALL THE CASES BEFORE EXCISE A UTHORITIES. THE ASSESSING OFFICER MADE ADDITIONS IN THE HANDS OF ASSESSEE, WHICH WERE DELETED BY CIT(A) AND GP RATE WAS APPLIED. AGAINST THE ORDER OF CIT(A), THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL, WHICH CONFIRMED THAT THE ASSESSEE WAS LIABLE TO PAY TAX ON THE ADDITIONAL INCOME IN THE HANDS OF ASSESSEE @ 4% OR ACTUAL GP DECLARED BY THE ASSESSEE, WHICHEVER WAS HIGHER, ON THE VALUE OF CLANDESTINE REMOVAL OF MATERIAL AS ADMITTED BY THE ASSESSEE. 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 19 3 7 . THE ISSUE WHICH ARISES BEFORE US IS WHETHER IN S UCH CIRCUMSTANCES, THE ASSESSEE CAN BE SAID TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME MAKING IT LIABLE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE DGCEI HAD TAKEN ACTIO N AGAINST CERTAIN PERSONS AND THERE WERE ALLEGATIONS OF CLANDESTINE REMOVAL OF GOODS BY MANUFACTURERS OF STEEL INCLUDING THE ASSESSEE, WHO IN TURN, HAD FILED A PETITION BEFORE CENTRAL EXCISE AND CUSTOMS SETTLEMENT COMMISSION IN THIS REGARD, THEN THE FACTUM OF GOODS BEING REMOVED CLANDESTINELY STANDS ESTABLISHED. THE TRIBUNAL WHILE DECIDING THE APPEAL IN THE CASE OF ASSESSEE VIDE CONSOLIDATED ORDER IN SHREE OM ROLLING MILLS PVT. LTD. VS. ADDL. CIT IN ITA NOS.125 & 127/PN/2012 AND CROSS APPEALS IN ITA NOS.43 0 & 431/PN/2012, RELATING TO ASSESSMENT YEARS 2007 - 08 & 2008 - 09 VIDE ORDER DATED 15.07.2015 AND VIDE CORRIGENDUM DATED 17.02.2016 CONFIRMED THE ADDITION OF ADDITIONAL INCOME IN THE HANDS OF ASSESSEE. IN THESE CIRCUMSTANCES, THE ASSESSEE IS LIABLE TO HAVE CONCEALED ITS INCOME BY NOT OFFERING THE INCOME ON SUCH CLANDESTINE LIABLE TO HAVE CONCEALED ITS INCOME BY NOT OFFERING THE INCOME ON SUCH CLANDESTINE REMOVAL OF GOODS WITHOUT PAYMENT OF EXCISE DUTY. THE ADDITION IN THE HANDS WAS MADE @ 4% OR ACTUAL GP DECLARED BY THE ASSESSEE WHICHEVER WAS HIGHER ON THE VALUE OF SUCH SUPPRESSED PRODUCT ION TO THE EXTENT OF RS.1, 58 , 612 / - , AS REFERRED TO BY THE CIT(A) IN THE ORDER PASSED AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE ADDITIONAL INCOME ON THIS ACCOUNT AND PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LEVIABLE ON SUCH ADDITION. WE HOLD SO. 3 8 . ANOTHER ADDITION MADE IN THE CASE OF THE ASSESSEE WAS UNDER SECTION 69C OF THE ACT ON ACCOUNT OF COST OF RAW M ATERIAL UTILIZED FOR SUPPRESSED PRODUCTION. THE TRIBUNAL DELETED THE AFORESAID ADDITION IN THE HANDS OF ASSESSEE AND CONSEQUENTLY, NO PENALTY IS LEVIABLE ON THE SAID ADDITION. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO 1885, 1886 & 2181 /PN/201 4 2171/PN/2014 06/PN/2015 MATSYODARI STEEL & AL LOYS PVT. LTD. 20 RESTRICT THE PENALTY TO BE LEV IED UNDER SECTION 271(1)(C) OF THE ACT ON ADDITION ON ACCOUNT OF GP RATE . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 3 9 . IN THE RESULT, APPEALS OF THE ASSESSEE RELATING TO ASSESSMENT YEARS 2010 - 11 & 2011 - 12 ARE PARTLY ALLOWED & RELAT ING TO ASSESSMENT YEAR 2007 - 08 IS ALLOWED AND APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 14 TH DAY OF JU LY , 201 6 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 14 TH JU LY , 201 6 . GCVSR GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1 . / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) , AURANGABAD ; 4. / THE CIT , AURANGABAD ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE