THE DCIT, 1(1), Indore V. M/s. ANANT STEELS PVT. LTD., Indore

ITA 792/IND/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0700 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 15-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: S N AGRAWAL
• Keywords: Gross profit estimation; Rejection of books of accounts; Unexplained investment; Set aside
• Section: 143(3); 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCHE, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.587/IND/2016 ASSESSMENT YEAR: 2012-13 M/S ANANT STEELS PVT. LTD. 170/10, FILM COLONY RNT MARG, INDORE M.P. / VS. ITO-1(4) INDORE M.P. (APPELLANT) (REVENUE) P.A. NO.AACCA1283E ITA NO.792/IND/2016 ASSESSMENT YEAR: 2012-13 DCIT-1(1) INDORE / VS. M/S ANANT STEELS PVT. LTD. 170/10, FILM COLONY RNT MARG, INDORE M.P. (APPELLANT) (RESPONDENT) P.A. NO.AACCA1283E APPELLANT BY SHRI S.N. AGRAWAL, AR REVENUE BY SHRI ASHIMA GUPTA, CIT-DR DATE OF HEARING: 05.03.2019 DATE OF PRONOUNCEMENT: 28.03.2019 ANANT STE EL PVT. LTD. 2 / O R D E R PER KUL BHARAT, J.M: THESE TWO APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF I NCOME TAX(APPEALS)-I INDORE DATED 21/02/2016 PERTAINING TO ASSESSMENT YEAR 2012-13. FIRST WE TAKE UP REVENUES APPEAL IN ITANO.792/IND/20 16. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADDITIO N MADE ON ACCOUNT OF ESTIMATED GP. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 7,97,54, 165/ - AND RS.3,41,55,992/~ MADE ON ACCOUNT OF ALLEGED EXCISE DUTY AND VAT TAX COLLECTED BUT NO T PAID IN GOVERNMENT ACCOUNT. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN IGNORING THE FACTS OF T HE CASE THAT THE ADDITION MADE ON ACCOUNT OF ALLEGED EXCISE DUTY AND VAT TAX WERE BASED ON INCRIMINATING INVOICES SE IZED DURING THE EXCISE SEARCH AND THE SAME WAS NOT INCLU DED IN THE TURNOVER. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 5, 00, 00, 000/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT TO MAKE UNACCOUNTED TURNOVER OF RS. 77,41,64,850/-. 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) HAS ERRED IN IGNORING THE FACTS THAT WORKING CAPITAL (UNACCOUNTED) IS NEEDED TO RUN UNACCOUNTED BUSINESS. ANANT STE EL PVT. LTD. 3 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THA T CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSME NT AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER CALLED AS 'THE ACT') WAS FRAMED VIDE O RDER DATED 31.3.2015. WHILE FRAMING THE ASSESSMENT, ASSE SSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATE D GROSS PROFIT OF UNACCOUNTED SALES. THE A.O. NOTICED THAT DIRECTOR GENERAL OF CENTRAL EXCISE (INVESTIGATION) CONDUCTED SEARCH ON 5.1.2012 AT OFFICE PREMISES, FACTORY, RESIDENTIA L PREMISES OF THE KEY PERSONS AND SEIZED VARIOUS DOCUMENTS. THE COMMISSIONER OF CENTRAL EXCISE, AFTE R SCRUTINISING THE BOOKS OF ACCOUNTS, LOOSE DOCUMENTS AND OTHER DOCUMENTS, ISSUED SHOW CAUSE NOTICE, THEREBY THE ASSESSEE WAS CALLED UPON TO EXPLAIN ABOUT CLANDESTI NE CLEARANCE OF TMT BARS VALUED AT RS.94,79,17,806/-. THE A.O., THEREFORE, ISSUED A NOTICE TO THE ASSESSEE AN D MADE ADDITION ON THE BASIS OF THE ENQUIRY CONDUCTED BY T HE CENTRAL EXCISE DEPARTMENT. THE AO ALSO REJECTED BOO KS OF ACCOUNTS AND MADE ADDITION ACCOUNT OF GROSS PROFIT AT RS.8 CRORES, ADDITION ON ACCOUNT OF CENTRAL EXCISE AT ANANT STE EL PVT. LTD. 4 RS.7,97,54,165/-, ADDITION ON ACCOUNT OF VAT RS.3,41,55,992/- AND UNDISCLOSED INVESTMENT OF RS.5 CRORES. 3. AGGRIEVED BY THIS THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSION S PARTLY ALLOWED THE APPEAL. LD. CIT(A) THEREBY, UPHELD REJE CTION OF BOOKS OF ACCOUNTS HOWEVER LD. CIT(A) APPLIED THE NE T PROFIT @ 2.3% ON THE TOTAL TURNOVER INCLUDING TURNO VER DETERMINED BY THE EXCISE AUTHORITY. FURTHER, LD. CI T(A) DELETED THE ADDITION MADE IN RESPECT OF EXCISE DUTY AND VAT ALLEGED TO HAVE BEEN COLLECTED BY THE ASSESSEE. THE LD. CIT(A) DELETED THE ADDITION OF RS.5,00,00,000/- MADE ON ACCOUNT OF INVESTMENT ON THE ALLEGED UNACCOUNTED BUSINESS. THE LD. CIT(A) DIRECTED THE AO TO VERIFY THE CLAIM OF CREDIT OF TAXES AS AVAILABLE U/S 115JA OF THE AC T AND ALLOW CLAIM OF CREDIT OF TAXES AS PER LAW. AGAINST THIS BOTH ASSESSEE AND REVENUE ARE IN APPEAL. 4. THE REVENUE THROUGH GROUND NO.1 IS IN APPEAL AGAINS T RESTRICTING THE GP RATE @ 5% TO NP RATE @ 2.3% BY L D. CIT(A). LD. CIT-DR SUPPORTED THE ORDER OF THE AO AN D ANANT STE EL PVT. LTD. 5 SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN NOT CONFIRMING THE FINDING OF THE AO. LD. CIT-DR SUBMIT TED THAT THE AO HAD APPLIED 5% ON THE TOTAL TURNOVER INCLUDING THE ALLEGED SUPPRESSED SALES AS FOUND BY THE OFFICIALS OF THE CENTRAL EXCISE DEPARTMENT. LD. CIT -DR SUBMITTED THAT THE LD. CIT(A) OUGHT TO HAVE AFFIRME D THE VIEW OF THE AO. ON THE CONTRARY, LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSION AS MADE IN THE W RITTEN SUBMISSIONS FILED BEFORE US. THE SUBMISSIONS OF THE ASSESSEE ARE THAT THE AO WAS NOT JUSTIFIED IN REJEC TING THE BOOKS OF ACCOUNTS. THE BOOK RESULTS COULD NOT HAVE BEEN DISTURBED. IT IS CONTENDED THAT ADMITTEDLY THE SHOW CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT AND ORDER IN ORIGINAL APPEAL HAVE BEEN SET ASIDE BY THE CESTAT V IDE ORDER DATED 27.9.2018. THE RATIO LAID DOWN IN THE C ASE OF CIT VS. SOMANI PILKINGTONS LTD., 133 TAXMAN 717 (P & H) FURTHER SUPPORTS THE CLAIM OF THE ASSESSEE. MORE SO NO INDEPENDENT INQUIRY IN THIS REGARD WAS MADE BY THE AO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. CIT(A) AFTER ANANT STE EL PVT. LTD. 6 CONSIDERING THE SUBMISSIONS AND RELYING UPON EARLIE R ORDER OF THE TRIBUNAL APPLIED NET PROFIT @ 2.3%. WE FIND THAT LD. CIT(A) OBSERVED THAT IN ASSESSEES OWN CAS E FOR THE ASSESSMENT YEAR 2007-08 IN IT(SS)A NOS.24 & 35/IND/2010, THE TRIBUNAL VIDE ORDER DATED 13.2.201 2 HAD APPROVED APPLICATION OF NET PROFIT RATE @3.3% F OR ESTIMATION WHEN THERE WAS EVIDENCE OF UNRECORDED TRANSACTIONS. HOWEVER, CONSIDERING OTHER FACTORS, L D. CIT(A) APPLIED THE RATE @ 2.3% ON THE ENTIRE TURNOV ER. CONSIDERING TOTALITY OF FACTS, ADMITTEDLY THE TURNO VER WHICH THE BASIS OF SHOW CAUSE NOTICE OF EXCISE DEPARTMENT HAS BEEN SET ASIDE BY THE CESTAT, THEREF ORE THE COMPONENT IS NOT AVAILABLE NOW FOR ESTIMATING T HE PROFIT. WE, THEREFORE, DIRECT THE AO TO ADOPT A NET PROFIT @3.3% ON THE TURNOVER EXCLUDING THE TURNOVER AS DETERMINED BY THE EXCISE AUTHORITIES. ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE REVENUE IS PARTLY ALLOW ED. 6. THROUGH GROUND NOS.2 & 3, THE REVENUE HAS CHALLENGE D THE ADDITION OF RS.7,97,54,165/7 & RS.3,41,55,992/- TOTALING TO RS.11,39,10,157/- ON ACCOUNT OF EXCISE DUTY ANANT STE EL PVT. LTD. 7 AND VAT TAX COLLECTED ON THE AMOUNT OF ESTIMATED TURNOVER AS CALCULATED BY THE EXCISE DEPARTMENT. TH IS AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE BY T HE ASSESSING OFFICER ON ACCOUNT OF ALLEGED UNACCOUNTED SALES. THE LD. CIT/DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A). CONSIDERING THE MATERIAL AVAILABLE ON RECORD, WE FI ND THAT THE CESTAT VIDE ORDER DATED 27.9.2018 HAS SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A). THUS, GROUND NOS.2 & 3 OF THE APPEAL OF THE REVENUE ARE DISMISSED. 7. THROUGH GROUND NO.4, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.5 CRORES ON ACCOUNT OF UNACCOUNTED BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER ON THE BASIS OF SHOW CAUSE NOTICE OF THE EX CISE DEPARTMENT REACHED TO A CONCLUSION THAT THE ASSESSE E WAS ENGAGED IN THE BUSINESS OF UNACCOUNTED SALES OUT OF ITS ANANT STE EL PVT. LTD. 8 BOOKS OF ACCOUNT AND THEREFORE, SOME INVESTMENT WOU LD ALSO HAVE BEEN MADE BY THE ASSESSEE FOR THE ALLEGED UNACCOUNTED BUSINESS. THE LD. CIT/DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF T HE LD. CIT(A). CONSIDERING THE MATERIAL AVAILABLE ON RECOR D, WE FIND THAT THE CESTAT VIDE ORDER DATED 27.9.2018 HAS SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF CENTR AL EXCISE AND SERVICE TAX, THEREFORE, THE ACTION OF TH E ASSESSING OFFICER IS NOT JUSTIFIED. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A). THUS, GROUND NO.4 OF T HE APPEAL OF THE REVENUE IS DISMISSED. 8. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO.587/IND/2016 WHEREIN THE ASSESSEE HAS TAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE, LD. CIT(A) HAS ERRED IN APPROVING THE ORDER AS PASSED U /S 143(3) OF THE ACT AFTER MAKING VARIOUS ADDITION TO THE INCOME OF THE ASSESSEE EVEN WHEN CASE OF THE ASSESS EE WAS SELECTED UNDER CASS. THE ADDITION SO MADE REQUIRES TO BE RESTRICTED LIMITED TO THE REASONS FOR SELECTION UND ER CASS. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN APPROVING THE ORDER AS PASSED B Y THE ITO EVEN WHEN HE WAS NOT AUTHORISED TO PASS ORDER I N THE ANANT STE EL PVT. LTD. 9 CASE OF THE ASSESSEE COMPANY. 3. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN APPROVING THE REJECTION OF BOOK S OF ACCOUNT EVEN WHEN BOOKS OF ACCOUNT IS DULY AUDITED AND THERE WAS NO REASON FOR REJECTION OF THE SAME. 4. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDITION OF RS.3,43,50,556/- ON ACCOUNT OF LOW GROSS PROFIT WIT HOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUB MISSION MADE BEFORE HIM. 9. GROUND NOS. 1 &2 OF THE APPEAL OF THE ASSESSEE ARE WITH REGARD TO THE FACT THAT WHEN THE CASE OF THE ASSESS EE WAS SELECTED UNDER CASS, THEN THE ASSESSING OFFICER HAD NO JURISDICTION TO MAKE INQUIRY OTHER THAN THE REASON FOR SELECTION OF THE CASE FOR SCRUTINY. DURING THE COUR SE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE DID N OT PRESS GROUND NOS.1 & 2 OF THE APPEAL OF THE ASSESSE E. THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. 10. GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS WITH REGARD TO REJECTION OF BOOKS OF ACCOUNT. 11. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD NO T FOLLOWED THE PROVISIONS OF SECTION 145 OF THE INCOM E TAX ACT. THE LD. CIT/DR SUPPORTED THE ORDER OF THE ASSE SSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ANANT STE EL PVT. LTD. 10 ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A). W E FIND THAT THE ASSESSING OFFICER DISCUSSED THE CONTENTS R ELATED TO THE SHOW CAUSE NOTICE, CASH PAYMENTS TOWARDS PURCHASE OF SCRAP AND ALSO CASH PAYMENT TO THE TRANSPORTER ON THE SAME DAY, STATEMENTS OF SMT. NEE RA BANASAL AND MAYANK BANSAL, UNEXPLAINED INVESTMENT A ND VALUATION OF CLOSING STOCK AND G.P. RATE ETC. IN DE TAIL IN THE ASSESSMENT ORDER. WHILE DECIDING GROUND NO.1 OF THE APPEAL OF THE REVENUE, WE HAVE PARTLY ALLOWED THE G ROUND OF THE APPEAL OF THE REVENUE DISCUSSING THE FACTS O F PRESENT ISSUE. CONSIDERING THE MATERIAL AND RIVAL SUBMISSIONS AVAILABLE ON RECORD, WE FIND THE LD. CI T(A) WAS JUSTIFIED IN APPROVING THE ACTION OF THE ASSESSING OFFICER. THUS, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 12. GROUND NO.4 OF THE APPEAL OF THE ASSESSEE IS WITH R EGARD TO ADDITION ON ACCOUNT OF LOW GROSS PROFIT. 13. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY US WHILE DECIDING GROUND NO.1 OF THE APPEAL OF THE REV ENUE. FOLLOWING THE REASONING GIVEN IN FOREGOING PARAS, W E SET ANANT STE EL PVT. LTD. 11 ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. AC CORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMIS SED. 14. FINALLY, APPEAL OF THE REVENUE IS PARTLY ALLOWED WH EREAS THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.03.20 19. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 28/03/2019 PATEL, P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE