M/s.Gasha steels P.Ltd, Calicut V. ACIT, Calicut

ITA 90/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68923 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: C B M WARRIER

Judgement Text

1 ITA NO. 89 & 90/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 89 & 90/COCH/2013 (ASSESSMENT YEAR 2005-06 & 2006-07) M/S GASHA STEELS PVT LTD VS A.C.I.T., CIR.1(1) 23/2087, PANNIYANKARA KOZHIKODE KOZHIKODE 673 003 PAN : AABCG4650L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CBM WARRIER RESPONDENT BY : SMT. SUSAN GEORGE VARGHESE DATE OF HEARING : 11-06-2013 DATE OF PRONOUNCEMENT : 23-08-2013 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE COMMON ORDER PASSED BY THE CIT(A)-I, KOZHIKODE FOR ASSESSM ENT YEARS 2005-06 AND 2006-07. SINCE COMMON ISSUE ARISES FOR CONSIDE RATION WE HEARD THESE APPEALS TOGETHER AND DISPOSE OF THEM BY THIS COMMON ORDER. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO REO PENING OF THE ASSESSMENTS. SHRI CBM WARRIER, THE LD.REPRESENTATI VE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING 2 ITA NO. 89 & 90/COCH/2013 AND SALE OF IRON AND STEEL PRODUCTS. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT ON THE BA SIS OF THE INSPECTION REPORT SAID TO BE FORWARDED BY THE CENTRAL EXCISE A UTHORITIES. ACCORDING TO THE LD.REPRESENTATIVE, THE CENTRAL EXCISE AUTHORITI ES HAVE NOT MADE ANY ASSESSMENT OF EVASION OF PRODUCTION UNDER THE CENTR AL EXCISE & CUSTOMS ACT. THE PROCEEDINGS BEFORE THE CENTRAL EXCISE & C USTOMS AUTHORITIES ARE STILL PENDING AND HAVE NOT ATTAINED FINALITY. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE REOPENING OF THE ASSESSMENT ON THE BASIS OF ANY UNCONFIRMED MATERIAL FROM CENTRAL EXCISE & CUSTOMS DEPARTMENT IS NOT JUSTIFIED. 3. ON THE CONTRARY, SMT. SUSAN GEORGE VARGHESE, THE LD.DR SUBMITTED THAT DURING THE SEARCH BY THE CENTRAL EXCISE AUTHOR ITIES INCRIMINATING MATERIALS WERE FOUND AND SEIZED EVIDENCING UNACCOUN TED RECEIPT OF STEEL INGOTS AND PRODUCTION OF M.S. RODS. ON THE BASIS O F THE INFORMATION RECEIVED FROM THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, CALICUT, THE ASSESSING OFFICER FOUND THAT THE INCOME ON PRODUCTI ON AND SALE OF UNACCOUNTED M.S. RODS ESCAPED ASSESSMENT. ACCORDIN GLY, THE ASSESSMENT WAS REOPENED FOR BOTH THE ASSESSMENT YEA RS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE 3 ITA NO. 89 & 90/COCH/2013 ASSESSING OFFICER RECEIVED INFORMATION FROM THE COM MISSIONER OF CENTRAL EXCISE & CUSTOMS REGARDING RECEIPTS AND PRODUCTION OF UNACCOUNTED M.S. RODS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERE D OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY CAME TO THE CONCLUSIO N THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDIN GLY, THE ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS HAVE RIGH TLY BEEN REOPENED. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITIES. ACCORDINGLY, THE SAME IS CONFIRMED. 5. NOW COMING TO THE MERIT OF THE ADDITION, SHRI CB M WARRIER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT T HE ASSESSING OFFICER MADE THE ADDITION WITHOUT ANY INDEPENDENT ENQUIRY O N THE BASIS OF THE MATERIAL SAID TO BE FOUND BY THE CENTRAL EXCISE & C USTOMS AUTHORITIES. ACCORDING TO THE LD.REPRESENTATIVE, NO MATERIAL REG ARDING SUPPRESSION OF PRODUCTION WAS FOUND FROM THE PREMISES OF THE ASSES SEE. MOREOVER, THE STATEMENT SAID TO BE RECORDED BY THE CENTRAL EXCISE & CUSTOMS AUTHORITY WERE RELIED UPON WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE FOR CROSS EXAMINATION. THE LD.REPRESENTATIVE FURTHER SUBMITT ED THAT THE ASSESSING OFFICER COMPARED THE CONSUMPTION OF ELECTRICITY AND FURNACE OIL WITH SOME OTHER COMPANY AND CAME TO THE CONCLUSION THAT THE A SSESSEE MIGHT HAVE PRODUCED UNACCOUNTED M.S. RODS. ACCORDING TO THE L D.REPRESENTATIVE, THE ASSESSING OFFICER WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE MADE THE 4 ITA NO. 89 & 90/COCH/2013 COMPARISON. THE LD.REPRESENTATIVE SUBMITTED THAT T HE COMPANY, M/S PEEKAY ROLLING MILLS LTD IS ENGAGED IN THE PRODUCTI ON OF TOTALLY DIFFERENT SIZES OF M.S. BARS. THE ASSESSEE IS ENGAGED IN PRO DUCTION OF 05MM, 06MM AND 08MM RODS. THEREFORE, NATURALLY THE CONSU MPTION OF ELECTRICITY AND FURNACE OIL WOULD BE MORE IN THE CASE OF THE AS SESSEE. ACCORDING TO THE LD.REPRESENTATIVE, CONSUMPTION OF ELECTRICITY P ER UNIT OF PRODUCTION IS CERTIFIED BY THE EXPERTISE AND THE SAME WAS ALSO AC CEPTED BY THE SALES-TAX AUTHORITIES. ACCORDING TO THE LD.REPRESENTATIVE, I N THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE ASSESSEE HAS MANUFACTURED UNACCOUNTED M.S. RODS, THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE MATERIAL GATHERED FROM THE CENTRAL EXCISE AUTHORITI ES CANNOT BE JUSTIFIED. 6. ON THE CONTRARY, SMT. SUSAN GEORGE VARGHESE, THE LD.DR SUBMITTED THAT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS IT WAS FOUND THAT THE ASSE SSEE RECEIVED STEEL INGOTS, MANUFACTURED AND CLEARED M.S RODS AND BARS WITHOUT PAYMENT OF DUTY, OUTSIDE THE BOOKS OF ACCOUNT. ACCORDING TO T HE LD.DR, THE DIRECTOR OF THE ASSESSEE COMPANY WAS EXAMINED BY THE CENTRAL EX CISE AUTHORITY. WHEN THE DIRECTOR OF THE ASSESSEE COMPANY WAS EXAMI NED, THERE IS NO QUESTION OF ANY CROSS EXAMINATION OF THE DIRECTOR. IN OTHER WORDS, NO ONE COULD CROSS EXAMINE HIMSELF AGAINST THE STATEMENT M ADE TO THE AUTHORITIES. THEREFORE, ACCORDING TO THE LD.DR, THE ASSESSING OF FICER HAS RIGHTLY RELIED 5 ITA NO. 89 & 90/COCH/2013 UPON THE STATEMENT RECORDED FROM THE DIRECTOR OF TH E ASSESSEE BY THE CENTRAL EXCISE & CUSTOMS AUTHORITIES. ON THE BASIS OF THE INCRIMINATING MATERIAL FOUND BY CENTRAL EXCISE & CUSTOMS AUTHORIT IES, THE ASSESSING OFFICER COMPARED THE PRODUCTION OF THE ASSESSEE WIT H SIMILAR COMPANIES, WHICH ARE ALSO MANUFACTURING M.S. RODS. ACCORDINGL Y, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE CONSUMPTION OF ELECTRICITY AND FURNACE OIL WAS MUCH HIGHER IN THE CASE OF THE ASSE SSEE COMPANY. THEREFORE, NATURALLY, THERE WOULD BE UNACCOUNTED PR ODUCTION OUTSIDE THE BOOKS OF ACCOUNT. REFERRING TO THE ASSESSMENT ORDE R, THE LD.DR SUBMITTED THAT CONSUMPTION OF ELECTRICITY AND FURNACE OIL BY PEEKAY ROLLING MILLS LTD FOR PRODUCTION OF ONE METRIC TON OF M.S. RODS IS 14 0 UNITS OF ELECTRICITY AND 45 LITRES OF FURNACE OIL. WHEN THIS WAS COMPARED W ITH THE ASSESSEES CONSUMPTION IT WAS FOUND THAT THE ASSESSEE CONSUMED MORE THAN WHAT WAS CONSUMED BY THE SIMILARLY PLACED COMPANIES. TH EREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE HAS SUPPRESSED THE ACTUAL PRODUCTION. HENCE, THE ASSESSING OFFICER HAS RIGHTLY ESTIMATED THE UNACCOUNTED PRODUCTION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER, ON THE BASIS OF THE INFORMATION RECEIVED FROM THE COMMISSI ONER OF CENTRAL EXCISE & CUSTOMS AND THE COMPARISON MADE WITH PEEKAY ROLLI NG MILLS LTD 6 ITA NO. 89 & 90/COCH/2013 ESTIMATED THE UNACCOUNTED PRODUCTION. IT IS NOT KN OWN THE STAGE OF THE PROCEEDINGS INITIATED BY THE CENTRAL EXCISE AUTHORI TIES. HOWEVER, THE LD.REPRESENTATIVE FOR THE ASSESSEE CLAIMS THAT THE PROCEEDINGS HAVE NOT REACHED FINALITY AND ARE STILL PENDING. THE PROCEE DINGS BEFORE THE CENTRAL EXCISE AUTHORITIES ARE INDEPENDENT AND SEPARATE AND THE PROCEEDINGS BEFORE THE INCOME-TAX AUTHORITIES ALSO ARE INDEPEND ENT AND SEPARATE. THE MATERIAL COLLECTED BY THE CENTRAL EXCISE AUTHORITIE S MAY BE ONE OF THE RELEVANT FACTORS TO BE CONSIDERED FOR ESTIMATING TH E ASSESSABLE INCOME OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER CANNO T PLACE SOLE RELIANCE ON THE MATERIALS COLLECTED BY THE CENTRAL EXCISE AU THORITIES WITHOUT ANY INDEPENDENT ENQUIRY. IN OTHER WORDS, THE ASSESSING OFFICER HAS TO CONDUCT INDEPENDENT ENQUIRY IN THE LIGHT OF THE MATERIAL FI LED BY THE CENTRAL EXCISE & CUSTOMS AUTHORITIES AND THEREAFTER RECORD AN INDE PENDENT FINDING WITH REGARD TO THE INCOME OF THE ASSESSEE. IN THE CASE BEFORE US, THE ASSESSING OFFICER HAS SIMPLY PLACED RELIANCE ON THE MATERIAL SEIZED BY THE CENTRAL EXCISE & CUSTOMS AUTHORITIES WITHOUT ANY FU RTHER ENQUIRY CARRIED OUT BY HIM. MOREOVER, THE CONSUMPTION OF FUEL LIKE ELECTRICITY, FURNACE OIL WOULD DEPEND UPON THE MAINTENANCE OF THE MACHINERY USED FOR MANUFACTURING. A MACHINERY WELL MAINTAINED MAY CON SUME LESS FUEL THAN THE MACHINERY WHICH WAS NOT MAINTAINED PROPERLY. T HEREFORE, THOUGH THE CONSUMPTION OF FUEL MAY BE ONE OF THE FACTORS TO BE TAKEN INTO CONSIDERATION, THE ENTIRE PRODUCTION CANNOT BE ESTI MATED ON THE BASIS OF 7 ITA NO. 89 & 90/COCH/2013 THE CONSUMPTION OF FUEL ALONE. THE OTHER FACTORS S UCH AS CONSUMPTION OF RAW MATERIALS, CATALYST, IF ANY, WAGES PAID TO THE EMPLOYEES, ETC. NEED TO BE TAKEN INTO CONSIDERATION. THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS TO CONDUCT I NDEPENDENT ENQUIRY ON THE BASIS OF THE MATERIAL FURNISHED BY THE CENTRAL EXCISE & CUSTOMS AUTHORITIES AND THE CONSUMPTION OF FUEL BY THE ASSE SSEE AND OTHER SIMILARLY PLACED COMPANIES. AS RIGHTLY SUBMITTED BY THE LD.D R, THE CENTRAL EXCISE & CUSTOMS AUTHORITIES EXAMINED THE DIRECTOR OF THE AS SESSEE COMPANY. THEREFORE, AT THE BEST, THE ASSESSING OFFICER MAY F URNISH COPY OF THE STATEMENT RECORDED FROM THE DIRECTOR OF THE ASSESSE E COMPANY BY CENTRAL EXCISE & CUSTOMS AUTHORITIES AND CALL FOR HIS COMME NTS. THE CROSS EXAMINATION OF THE VERY SAME PERSON MAY NOT ARISE S INCE THE PERSON, WHO WAS EXAMINED IS THE DIRECTOR OF THE ASSESSEE COMPAN Y. HOWEVER, THE ASSESSING OFFICER IS BOUND TO FURNISH THE COPIES OF THE MATERIALS RECEIVED FROM THE CENTRAL EXCISE & CUSTOMS AUTHORITIES TO TH E ASSESSEE BEFORE PLACING RELIANCE ON THE SAME FOR MAKING ADDITION, I F ANY. SINCE THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INDEPENDENT ENQUIRY ON THE BASIS OF THE MATERIAL RECEIVED FROM THE CENTRAL EXCISE & CUSTOMS AUTHORITIES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFTER INDEPENDENT ENQUIRY. AC CORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSUE / ADDITION IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASS ESSING OFFICER SHALL 8 ITA NO. 89 & 90/COCH/2013 CONDUCT INDEPENDENT ENQUIRY AND RECONSIDER THE ISSU E INDEPENDENTLY IN THE LIGHT OF THE MATERIAL RECEIVED FROM THE CENTRAL EXCISE & CUSTOMS AUTHORITIES AND THEREAFTER RECORD AN INDEPENDENT FI NDING WITH REGARD TO THE ASSESSABLE INCOME OF THE ASSESSEE AFTER GIVING REAS ONABLE OPPORTUNITY OF HEARING. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD AUGUST, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 23 RD AUGUST, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH