M/S Anant Steel Pvt. Ltd., Indore V. THE ITO-1(4), Indore

MA 47/Ind/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8043 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 22-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S AMBEDKAR
• Assessee Lawyers: S N AGRAWALPANKAJMOGRA CAS
• Keywords: Gross profit estimation; Rejection of books of accounts; Rectification of order; Principle of natural justice; Set aside
• Section: 143(3); 260A; 254(2); 43; 72; 13; 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER MA NO.47/IND/2019 (ARISING OUT OF ASSESSEES ITA NOS.587/IND/2016, AND REVENUES ITA NO.792/IND/2016) ASSESSMENT YEAR: 2012-13 M/S ANANT STEELS PVT. LTD. , 170/10, FILM COLONY RNT MARG, INDORE / VS. ITO - 1(4) INDORE ( APPELLANT ) ( RE VENUE ) P.A. NO. AACCA1283E APPELLANT BY SHRI S.N. AGRAWAL&PANKAJMOGRA, CAS RE VENUE BY SHRI R . S . AMBEDKAR, SR. D R DATE OF HEARING: 15.11.2019 DATE OF PRONOUNCEMENT: 16.01.2020 / O R D E R PER KUL BHARAT, J.M: THIS MISC. APPLICATIONIS FILED BY ASSESSEE SEEKING F OR RECALLING OF THE ORDER OF THE TRIBUNAL DATED 28.03.2019PASSED IN ITA NO.587/IND/2016 PERTAINING TO ASSESSMENT YEAR 2012-13. MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 2 2. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE APPLICATION. 3. ON THE CONTRARY, LD. D.R. OPPOSED THE SUBMISSIONS AND SUBMITTED THAT THERE IS NO MISTAKE APPARENT FROM T HE RECORDS. THE ASSESSEE IS SEEKING TO REVIEW THE ORDER OF THE TRIBUNAL WHICH IS NOT PERMISSIBLE UNDER THE LAW. HOW EVER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS AN APPARENT MISTAKE ON THE RECORD AND HENCE THE ORDER DATE D 28.03.2019 DESERVES TO BE RECALLED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL AVAILABLE ON RECORDS. FOR THE SAKE OF CLARITY SUBMISSIONS MADE IN THE APPLICATIONS ARE REPRODUCED AS UNDER: 1] THE HONBLE ITAT VIDE ITS ORDER DATED28-03-2019 DECIDED THE APPEALS AS FILED AGAINST THE ORDER OF THE LD CI T [A]-1, INDORE DATED 31-03-2016. 2.1] THE REVENUE HAD TAKEN THE FOLLOWING GROUNDS IN THE PRESENT APPEALWHICH ARE SUMMARIZED AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, 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 CA SE, 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 ALLE GED EXCISE DUTY AND VAT TAX COLLECTED BUT NOT PAID IN GOVERNME NT ACCOUNT. MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 3 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, 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 SEIZED DUR ING THE EXCISE SEARCH AND THE SAME WAS NOT INCLUDED IN THE TURNOVER. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 5, 00, 00, 000/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMEN T 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. 2.2] THE ASSESSEE COMPANY HAD ALSO TAKEN THE FOLLOW ING GROUNDS IN THE PRESENT APPEAL WHICH ARE SUMMARIZED AS UNDER: 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 ASSESSEE WAS SELECTE D UNDER CASS. THE ADDITION SO MADE REQUIRES TO BE RESTRICTE D LIMITED TO THE REASONS FOR SELECTION UNDER CASS. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN APPROVING THE ORDER AS PASSED BY THE I TO EVEN WHEN HE WAS NOT AUTHORIZED TO PASS ORDER IN THE ANA NT STEEL 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 BOOKS OF AC COUNT 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 MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 4 ACCOUNT OF LOW GROSS PROFIT WITHOUT PROPERLY APPREC IATING THE FACTS OF THE CASE AND SUBMISSION MADE BEFORE HIM. REJECTION OF BOOKS OF ACCOUNTS 2.3.1] THE HONBLE BENCH IN PARA 11 ON PAGE NO. 9 & 10 OF ITS ORDER DEALT WITH THE SAID ISSUE AND HELD AS UNDER: 11.THE ASSESSING OFFICER HELD THAT THE ASSESSEE HA D NOT FOLLOWED THE PROVISIONS OF SECTION 145 OF THE INCOM E TAX ACT. THE LD. CIT/DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A). WE FIND THAT THE ASSES SING OFFICER DISCUSSED THE CONTENTS RELATED TO THE SHOW CAUSE NO TICE, CASH PAYMENTS TOWARDS PURCHASE OF SCRAP AND ALSO CASH PA YMENT TO THE TRANSPORTER ON THE SAME DAY, STATEMENTS OF SMT. NEERABANASAL AND MAYANKBANSAL, UNEXPLAINED INVESTME NT AND 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 GROUND OF T HE APPEAL OF THE REVENUE DISCUSSING THE FACTS OF PRESENT ISSU E. CONSIDERING THE MATERIAL AND RIVAL SUBMISSIONS AVAI LABLE ON RECORD, WE FIND THE LD. CIT(A) WAS JUSTIFIED IN APP ROVING THE ACTION OF THE ASSESSING OFFICER. THUS, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 2.3.2] THE HONBLE BENCH WHILE DECIDING THE SAID IS SUE STATED THAT THE LD COUNSEL OF THE ASSESSEE COMPANY RELIED UPON THE ORDER OF THE LDCIT(A). HOWEVER, THIS REMARK IS FACT UALLY NOT CORRECT SINCE THE ASSESSEE COMPANY CHALLENGED THE A CTION OF THE LDCIT(A) IN CONFIRMING THE REJECTION OF BOOKS O F ACCOUNTS. 2.3.3] THE ASSESSEE COMPANY CHALLENGED ALL THE ADDI TIONS MADE/ISSUES RAISED IN THE ASSESSMENT ORDER BEFORE T HE LD CIT (A). THE LDCIT(A) AFTER EXAMINING THE SUBMISSION OF THE APPELLANT APPROVED THE REJECTION OF BOOKS OF ACCOUN TS MERELY ON THE BASIS OF FINDING OF THE SHOW CAUSE NOTICE AS ISSUED BY MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 5 THE EXCISE DEPARTMENT. THE LD.CIT(A) IN PARA 6.1 ON INNER PAGE NO. 67 & 68 OF HIS ORDER OBSERVED AS UNDER: 6.1 ON PERUSAL OF THE MATERIAL ON RECORD IT IS SEE N THAT IT IS AN ADMITTEDFACT THAT THE DGCEI CONDUCTED A SEARCH ON T HE PREMISES OF THE APPELLANTON 05-01-2012. AS DETAILED IN THE ASSESSMENT ORDER THE DOCUMENTSFOUND REVEALED THAT T HE APPELLANT HAD INDULGED IN UNACCOUNTEDPRODUCTION AND SALE OF 32976.375 MT OF TMT BARS VALUED ATRS. 94,79,17,806/ - AND HAD ALSO MADE PURCHASES OF SCRAP WHICH WERE NOTRECO RDED AND FOR WHICH PAYMENTS WERE MADE IN CASH WHICH WERE ALS O NOTREFLECTED IN THE BOOKS OF ACCOUNTS MAINTAINED. T HE DISCREPANCIES NOTEDWERE NOT RECONCILED. EXCISE DUTY OF RS. 9,72,00,165/- WAS IMPOSED OFWHICH RS. 1,17,11,000/- HAS BEEN PAID ALSO. AT THE TIME OF SEARCH ONE OFTHE DIR ECTORS SHRIMAYANKBANSAL ADMITTED THAT UNRECORDED PRODUCTIO NAND SALE WAS BEING MADE WHICH WAS LATER RETRACTED. IT I S HOWEVER TO BENOTED THAT THE DISCREPANCIES POINTED OUT HAVE NOT BEEN RECONCILED BY THEAPPELLANT. THE APPELLANT HAS TAKEN THE STAND THAT THE DOCUMENTS FOUNDWERE FABRICATED BY TWO EMPL OYEES. IT HAS NOT BEEN EXPLAINED UNDER WHATCIRCUMSTANCES AND ON WHOSE DIRECTION SUCH FABRICATION WAS DONE ANDWHY SH OULD THE EMPLOYEE CONCERNED RESORT TO SUCH FABRICATION HAS A LSONOT BEEN EXPLAINED. CONSIDERING THE FACTS IN TOTALITY IT CAN NOT BE SAID THATTHE FINDINGS OF THE EXCISE AUTHORITIES HAVE BEE N DISPROVED AS FALSE OR FABRICATED. IT IS ALMOST FOUR YEARS SIN CE THE DATE ON WHICH THE SEARCH WASCONDUCTED BY THE EXCISE AUTHORI TIES AND YET THE APPELLANT HAS NOT BEENABLE TO ADD ANY SUBST ANTIAL MATERIAL TO ESTABLISH IT'S CASE THAT THEDOCUMENTS A RE FABRICATED. IN THE LIGHT OF THE ABOVE FINDING OF FACT THERECAN BE NO TWO OPINIONS AS TO THE STATUS OF THE BOOKS OF ACCOUNTS. THERE ISON RECORD UNDISPUTED EVIDENCE TO HOLD THAT THE BOOKS O F ACCOUNTS DID NOT REFLECT THE TRUE AND CORRECT PICTURE. IN VI EW OF THE ABOVE IT CANNOT BE HELDTHAT THERE WAS NO BASIS FOR REJECT ING THE BOOKS OF ACCOUNTS. AO WASTHEREFORE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS. ONCE THE BOOKS OFACCOUNTS WERE REJECTED T HE ONLY LOGICAL COURSE OPEN TO THE AO WAS TOESTIMATE THE PR OFITS. IN THE LIGHT OF THE FACTS AS AVAILABLE ON RECORDS THEACTIO N OF THE AO IS MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 6 FOUND TO BE JUSTIFIED AND THE SAME IS THEREFORE UPH ELD IN APPEAL. THIS GROUND OF THE APPELLANT IS THEREFORE DISMISSED . 2.3.4] IT IS QUITE CLEAR FROM THE FINDINGS OF THE L DCIT(A) THAT REJECTION OF BOOKS OF ACCOUNTS WAS APPROVED MERELY FOR THE REASON THAT EXCISE DEPARTMENT IN ITS SHOW CAUSE NOT ICE POINTED OUT VARIOUS MISTAKES IN THE BOOKS MAINTAINE D BY THE ASSESSEE COMPANY. HOWEVER, IT IS PERTINENT TO MENTI ON THAT SINCE THE SHOW CAUSE NOTICE ISSUED BY THE EXCISE DE PARTMENT WAS QUASHED SUBSEQUENTLY BY THE HONBLE CESTAT; HENCE,THERE WAS NO REASON FOR MAINTAINING THE REJEC TION OF BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. 2.4] THAT ALL OTHER REASONS AS LISTED BY THE ASSESS ING OFFICER WERE GENERAL IN NATURE AND DULY ADDRESSED BY THE AS SESSEE COMPANY IN THE SYNOPSIS AS FILED BEFORE THE HONBLE BENCH. THE HONBLE BENCH WAS THEREFORE NOT JUSTIFIED IN AP PROVING THE ACTION OF THE LD CIT (A) MORE SO WHEN VERY BASIS OF REJECTION OF THE BOOKS OF ACCOUNTS BY THE LDCIT(A) DID NOT EXIST .THAT IN VIEW OF THE ABOVE, HONBLE BENCH IS HEREBY REQUESTE D TO RECALL ITS ORDER AND DECIDE THE SAID GROUND IN RESPECT OF REJECTION OF BOOKS OF ACCOUNTS AFRESH. ESTIMATION OF INCOME GROUND NO. 1 OF THE DEPARTMENTAL APPEAL AND GROUND NO. 4 OF THE APPEAL AS FILED BY THE ASSESSEE COMPANY 3.1] THE HONBLE BENCH IN PARA 5 ON INNER PAGE NO. 5 & 6 OF ITS ORDER DECIDED THE GROUND NO. 1 OF THE DEPARTMENTAL APPEAL AND GROUND NO. 4 OF THE APPEAL AS FILED BY THE ASSE SSEE COMPANY. THE SAID PARA OF THE ORDER OF THE HONBLE BENCH IS REPRODUCED AS UNDER FOR YOUR READY REFERENCE: 5.WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERU SED THE MATERIAL AVAILABLE ON RECORD. LD. CIT(A) AFTER CONS IDERING THE SUBMISSIONS AND RELYING UPON EARLIER ORDER OF THE T RIBUNAL APPLIED NET PROFIT @ 2.3%. WE FIND THAT LD. CIT(A) OBSERVED THAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 -08 IN IT(SS)A NOS.24 & 35/IND/2010, THE TRIBUNAL VIDE ORD ER DATED MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 7 13.2.2012 HAD APPROVED APPLICATION OF NET PROFIT RA TE @3.3% FOR ESTIMATION WHEN THERE WAS EVIDENCE OF UNRECORDED TRANSACTIONS. HOWEVER, CONSIDERING OTHER FACTORS, L D. CIT(A) APPLIED THE RATE @ 2.3% ON THE ENTIRE TURNOVER. CON SIDERING TOTALITY OF FACTS, ADMITTEDLY THE TURNOVER WHICH TH E BASIS OF SHOW CAUSE NOTICE OF EXCISE DEPARTMENT HAS BEEN SET ASIDE BY THE CESTAT, THEREFORE THE COMPONENT IS NOT AVAILABL E NOW FOR ESTIMATING THE 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 ALLOWED. 3.2] THE HONBLE BENCH RELYING ON ITS OWN FINDINGS IN THE CASE OF THE ASSESSEE COMPANY ITSELF FOR THE ASSESSMENT Y EAR 2007- 08 MAINTAINED THE PERCENTAGE OF NET PROFIT AT 3.30% IN THIS YEAR ALSO. HOWEVER,THE HONBLE BENCH WHILE DECIDING THE SAID GROUND DID NOT CONSIDER THE FOLLOWING FACTS: 1 THE PERCENTAGE OF NET PROFIT DECLARED IN THIS YEAR WAS 0.29% 2 THE PERCENTAGE OF NET PROFIT AS DECLARED IN THE CAS E OF M/S SHIVANGI ROLLING MILLS P LIMITED WAS AT 0.49% WHICH WAS DULY ACCEPTED BY THE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORD ER 3 THE HIKE IN THE PRICE OF RAW MATERIAL WITH REFERENC E TO THE INCREASE IN THE PRICE OF SALE OF FINISHED GOODS 4 IN THE ASSESSMENT YEAR 2007 - 08, NET PROFIT AS DECLARED IN THE BOOKS OF ACCOUNTS WAS DULY ACCEPTED BUT THE RATE OF NET P ROFIT WAS ESTIMATED AND APPLIED ONLY ON THE AMOUNT OF UNACCOU NTED TURNOVER 5 THE ASSESSEE COMPANY MAINTAINED DAY TO DAY QUANTITA TIVE AND FINANCIAL RECORDS AND THOUGH, THE BOOKS OF ACCOUNTS WERE REJECTED BY THE ASSESSING OFFICER AND ALSO APPROVED BY THE H ONBLE BENCH, EVEN THEN THE ESTIMATION OF INCOME SHOULD HAVE BEEN ON THE BASIS OF BOOKS OF ACCOUNTS AS MAINTAINED WITH REFERENCE TO T HE DEFECTS AS POINTED OUT IN THE BOOKS OF ACCOUNTS 3.3] THE ASSESSEE COMPANY IN THE SYNOPSIS AS FILED BEFORE THE HONBLE BENCH DEALT WITH THE SAID GROUND OF APPEAL AT LENGTH BUT ENTIRE SUBMISSION OF THE ASSESSEE COMPANY WAS N OT TAKEN INTO ACCOUNT WHILE PASSING THE ORDER WHICH IS THEREFOREAMISTAKEAPPARENT FROM RECORD NECESSITATING MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 8 EXAMINATION OF THE SAID ISSUE AFRESH. THE SUBMISSIO N AS FILED BEFORE THE HONBLE BENCH IS REPRODUCED AS UNDER: 3.1.1] THE APPELLANT IN THIS GROUND OF APPEAL HAS CHALLENGED THE ESTIMATION OF GROSS PROFIT AT 5% BY THE ASSESSING OFFICER AND AS REDUCED TO 2% BY THE LD CIT[A]. 3.1.2] THE ASSESSING OFFICER WHILE MAKING ADDITION TO THE TOTAL INCOME OF THE APPELLANT CONSIDERED THE TURNOV ER AS SHOWN BY THE APPELLANTOF RS. 82,56,84,821/- AND TURNOVER AS ESTIMATED BY THE EXCISE DEPARTMENT OF RS. 77,41,64, 850/- THEREBY APPROXIMATELY TOTALING IT TO RS. 160,00,00, 000/- AND THEREAFTER APPLIED THE RATE OF GROSS PROFIT OF 5%. THE CALCULATIONIS SUMMARIZED IN TABULAR FORM AS UNDER: S.NO PARTICULARS AMOUNT [IN RS] 1 TOTAL TURNOVER AS SHOWN BY THE APPELLANT 82,56,84,721 2 ADDITIONAL TURNOVER AS ESTIMATED BY THE EXCISE DEPARTMENT 77,41,64,850 TOTAL TURNOVER 159,89,52,571 TOTAL TURNOVER AS ESTIMATED BY THE ASSESSING OFFICER 160,00,00,000 GROSS PROFIT APPLYING THE RATE OF 5% 8,00,00,000 LESS GROSS PROFIT AS SHOWN BY THE APPELLANT 25,98,878 NET ADDITION MADE TO THE TOTAL INCOME OF THE APPELLANT 7,74,01,122 3.2] THE APPELLANT DURING THE COURSE OF ASSESSMENT PROEEDINGS HAD FILED DETAILED REPLY AS TO JUSTIFY THE RATE OF GROSS PROFIT AS DECLARED IN ITS BOOKS OF ACOCUNTS. HOWEVER, THE ASS ESSING OFFICER WAS NOT ABLE TO CONTROVERT THE SUBMISSIONS MADE BY THE APPELLANT. 3.3.1] THE APPELLANT HAD FILED FOLLOWING REPLIES IN SUPPORT OF ITS CONTENTIONS WHICH ARE ALSO LISTED HEREUNDER: S.NO REPLY DT PARA PAGE NO. OF COMPILATION 1 25-02-2015 1 100 2 19-03-2015 2 119 TO 121 MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 9 3 27-03-2015 1.6 129 TO 131 3.3.2.1] COMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT OF THE YEAR UNDER CONSIDERATION AND THAT OF LAST TWO YEARS IS AS UNDER: S. NO. ASST YEAR TURNOVE R GROSS PROFIT G.P. MARG IN NET PROFIT N.P. MARG IN 1 2012- 13 82,56,8 7,721 25,98,8 78 0.31 % 24,25,3 53 0.29 % 2 2011- 12 76,46,2 9,309 - 3,95,63,4 72 - 5.17 % - 18,70,5 7,27 - 2.45 % 3 2010- 11 55,99,6 9,946 1,80,24, 210 3.32 % 1,02,90, 173 1.84 % 3.3.2.2] COMPRATIVE CHART OF GROSS PROFIT AND NET P ROFIT OF M/S SHIVANGI ROLLING MILLS PRIVATE LIMITED [PA NO: AAGC S8004B] FOR THE YEAR UNDER CONSIDERATION AND THAT OF LAST TWO Y EARS IS AS UNDER: A.Y. TURNOVER GROSS PROFIT (BEFORE DEPRECIA TION) GP MARGIN (BEFORE DEPRECIA TION) NET PROFIT NP MARGI N 2012- 13 63,59,81,4 07 - 1,09,75, 674 -0.0173 31,40, 480 0.49 % 2011- 12 48,47,96,8 90 42,37,6 22 0.0087 32,49, 693 0.67 % 2010- 11 37,93,44,0 32 - 54,16,0 90 -0.0143 - 61,32, 851 NEGA TIVE 3.3.2.3] COMPARATIVE CHART OF REALISATION FROM THE SALE OF STEEL BARS AND FROM THE SALE OF MS INGOT IN THE ASSESSMEN T YEAR 2010-11 AND 2012-13 IS AS UNDER: S DESCR 2010 - 11 2012 - 13 CHANGE MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 10 . N O IPTION OF MATER IAL IN PERCENT AGE STEEL BAR M S INGOT STEEL BAR M S INGOT STE EL BA R M S ING OT 1 SALES 53,17,9 5,876 2,34,6 9,591 62,55,7 6,219 18,51,3 0,898 2 QTY [IN MTONS ] 19,658 1,023 17,443 6,379 3 RATE PER TON 27,053 22,950 35,865 29,020 32. 57 26. 45 3.3.2.4] COMAPRATIVE CHART OF COST OF RAW MATERIAL AND MS INGOT AS PURCHASED BY THE APPELLANT FOR THE ASSESSMENT YE AR 2010- 11 AND 2012-13 IS AS UNDER: S . N O DESCRI PTION OF MATERI AL 2010-11 2012-13 CHANGE IN PERCENTAGE MS SCRAP M S INGOT MS SCRAP M S INGOT MS SCRA P MSIN GOT 1 PURCHA SES 28,05,1 8,076 5,59,63 ,409 48,63,2 7,720 5,49,81 ,711 2 QTY [IN M TONS] 24,120 2,420 29,233 1,748 3 RATE PER 11,630 23,126 16,636 31,452 43.0 4% 36.0 0% MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 11 TON 3.4] THAT ON COMPARISON OF THE ABOVE FIGURES, IT PR IMA FACIE SEEMS THAT PRICE OF RAW MATERIAL AS CONSUMED BY THE APPELLANT INCREASED BY 43.04% IN THE YEAR UNDER CONSIDERATION AS COMPARED TO ASSESSMENT YEAR 2010-11. SIMILARLY, THE PRICE OF MS INGOT ALSO INCREASED BY 36% IN THE YEAR UNDER CO NSIDERATION AS COMPARED TO ASSESSMENT YEAR 2010-11. HOWEVER, SA LES PRICE OF STEEL BAR DURING THIS PERIOD INCREASED BY 32.57% AND REALISATION OF MS INGOT INCREASED BY 26.45% ONLY. T HE APPELLANT WAS NOT ABLE TO SHIFT THE ENTIRE INCREASE IN THE CO ST OF PURCHASE OF RAW MATERIAL TO ITS CUSTOMERS IN THE FORM OF SAL ES AND IT WAS FOR THIS REASON THAT THE RATE OF GROSS PROFIT AND N ET PROFIT REDUCED IN THIS YEAR. 3.5] THE APPELLANT HAD INCURRED HUGE LOSSES IN ITS STEEL BUSINESS AND THE SAME WAS SET-OFF AND SHOWN AS PROFITS DUE T O INCOME AS EARNED BY THE APPELLANT FROM ITS DERIVATIVES/COM MODITITES BUSIESS. HENCE, EFFECTIVELY THERE WAS LOSS IN THE S TEEL BUSINESS OF THE APPELLANT. 3.6] THE ASSESSING OFFICER THEREFORE GROSSLY ERRED IN ESTIMATING THE RATE OF GROSS PROFIT OF THE APPELLANT AT 5% ON THE BASIS OF GROSS PROFIT RATE AS DECLARED BY M/S JAIDEEP ISPAT & ALLOYS P LIMITED FOR THE FOLLOWING REASONS: [I] THAT DURING THE COURSE OF ASSESSMENT PROCEEDING S, NO COMMENTS WERE CALLED FOR FROM THE APPELLANT ON T HE BOOK RESULT AS DECLARED BY M/S JAYDEEP ISPAT & ALLO YS P LIMITED. HENCE, G.P. RATE OF M/S JAIDEEP ISPAT & ALLOYS P LIMITED CANNOT BE APPLIED IN THE CASE OF THE APPELL ANT SINCE IT IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. [II] THAT TOTAL TURNOVER OF M/S JAIDEEP ISPAT & ALL OYS P LIMITED WAS OF RS. 334 CRORES AS SCANNED ON PAGE NO . 27 OF THE ASSESSMENT ORDER WHEREAS TOTAL TURNOVER OF THE APPELLANT WAS ONLY OF RS. 82 CRORES. [III] THE APPELLANT IS UNAWARE OF THE FACT AS TO HO W MUCH LOANS WERE TAKEN BY M/S JAIDEEP ISPAT & ALLOYS P LIMITED FROM BANKS SINCE, IN CASE OF HIGHER BANK LOANS, THE BORROWER NEEDS TO SHOW GOOD PROFITS FOR GETTING GOOD MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 12 RATING FROM DIFFERENT RATING AGENCIES FOR SECURING BETTER RATE OF INTEREST. [IV] THE MANAGEMENT OF THE APPELLANT WAS TAKEN OVER BY NEW DIRECTORS AND THEY WERE NOT IN A POSITION TO BARGAIN FROM THE RAW MATERIAL SUPPLIERS AND ALSO SO LD THEIR MATERIAL AT A CHEAPER RATE TO SUSTAIN THEIR MARKET SHARE. HOWEVER, PROBABLY, MANAGEMENT OF M/S JAIDEEP STEEL & ALLOYS P LIMITED WAS FAR MORE EXPER IENCED AND WAS COMPARATIVELY HAVING GOOD EXPOSURE OF THE M ARKET. 3.7] THE ASSESSING OFFICER SIMPLY REJECTED THE COMP ARATIVE CHART OF M/S SHIVANGI ROLLING MILLS PRIVATE LIMITED BY ST ATING THAT THE SAID COMPANY IS A SISTER/ASSOCIATED CONCERN OF THE APPELLANT. THE SAID APPROACH OF THE ASSESSING OFFICER WAS HIGH LY OBJECTIONABLE MORE SO WHEN THE OTHER ASSESSING OFFI CER WHILE PASSING THE ASSESSMENT ORDER IN THE CASE OF M/S SHI VANGI ROLLING MILLS PRIVATE LIMITED HAD ACCEPTED THE BOOK RESULTS AS DECLARED BY THAT COMPANY. 3.8] THAT INITIALLY M/S ANANT STEELS P LIMITED AND M/S SHIVANGI ROLLING MILLS P LIMITED WERE INCORPORATED BY LATE S HRI MOHAN KUMAR BANSAL AND HIS BROTHER DR RAJENDRA K BANSAL. THAT AFTER THE DEATH OF LATE SHRI MOHAN KUMAR BANSAL ON 18-08- 2009, SHARES OF BOTH THE COMPANIES IN THE GROUP WERE TRAN SFERRED AND FROM ASSESSMENT YEAR 2010-11 ONWARDS, BOTH THESE CO MPANIES DID NOT FALL UNDER THE DEFINITION OF EITHER SISTER CONCERNS OR ASSOCIATE CONCERNS. HENCE, THE ASSESSING OFFICER WA S NOT JUSTIFIED IN SIMPLY REJECTING THE COMPARATIVE CHART OF GROSS PROFIT MORE SO WHEN NATURE OF WORKING OF BOTH THESE COMPAN IES WASMORE OR LESS SIMILAR TO M/S JAIDEEP ISPAT & ALLO YS P LIMITED. NAMES OF DIRECTORS OF BOTH THESE COMPANIES IS AS UNDER: S.NO NAME OF DIRECTORS ANANT STEELS P LIMITED SHIVANGI ROLLING MILLS P LIMITED 1 [I] SMT NEERA BANSAL [II] SHRI MAYANK BANSAL [I] SHRI PANKAJ BANSAL [II] SHRI DIVANSHU BANSAL MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 13 3.9.1] THE NATURE OF BUSIENSS OF THE APPELLANT AND M/S SHIVANGI ROLLING MILLS P LIMITED WAS SOME HOW SIMILAR TO THA T OF M/S JAIDEEP ISPAT & ALLOYS P LIMITED. COMAPRATIVE CHART OF TOTAL TURNOVER AND BANK LOANS AS TAKEN BY THESE COMPANIE IS AS UNDER: S.N O PARTICULAR S ANANT STEELS P LIMITED SHIVANGI ROLLING MILLS P LIMITED JAIDE EP ISPAT & ALLOYS P LIMITED 1 TOTAL TURNOVER 82,56,87,72 1 63,59,81,40 7 334,36,94,44 5 2.1 LONG TERM BORROWINGS 2,35,29,092 2,02,95,856 44,12,80,146 2.2 SHORT TERM BORROWINGS 5,80,73,541 4,03,19,611 21,16,34,446 TOTAL BORROWINGS 8,16,02,633 6,06,15,467 65,29,14,592 3.9.2] THAT IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE TURNOVER OF THE APPELLANT WAS OF RS. 82 CRORES ONLY WHEREAS TOT AL TURNOVER OF M/S JAIDEEP ISPAT & ALLOYS P LIMITED WAS OF RS. 334 CRORES. MOREOVER, THE TOTAL BORROWINGS OF M/S JAIDEEP ISPAT & ALLOYS P LIMITED WAS OF RS. 65 CRORES AS AGAINST THE TOTAL B ORROWINGS OF THE APPELLANT OF RS. 8 CRORES ONLY. HOWEVER, IT IS ALSO CLEAR FROM THE ABOVE COMPARATIVE CHART THAT THE TURNOVER OF M/ S SHIVANGI ROLLING MILLS P LIMITED AND THE APPELALNT WAS MORE OR LESS COMPARABLE. HENCE, THE ASSESSING OFFICER GROSSLY ER RED IN RELYING ON THE BOOK RESULTS OF M/S JAIDEEP ISPAT & ALLOYS P LIMITED INSTEAD OF M/S SHIVANGI ROLLING MILLS P LIM ITED. 3.9.3] THAT M/S JAIDEEP ISPAT & ALLOYS P LIMITED IS BELONGING TO M/S MOIRA STEELS P LIMITED AND M/S RATHI IRON & STE EL P LIMITED. THE SAID GROUP HOLDS MAJORITY OF THE PRODU CTION UNDER ITS CONTROL AND IS HAVING MONOPOLY IN THE STEEL MAR KET. HENCE, THERE IS NO RATIONALE FOR COMPARING THE RESULTS OF THE APPELLANT WITH M/S JAIDEEP ISPAT & ALLOYS P LIMITED. 3.10] IT IS PERTINENT TO ALSO HIGHLIGHT THAT BOOK R ESULT IN THE CASE OF M/S SHIVANGI ROLLING MILLS P LIMITED WAS DULY AC CEPTED BY THE ASSESSING OFFICER AS DECLARED BY THAT COMPANY. MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 14 3.11.1]THAT ON PAGE NO. 28 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER PREPARED TWO DIFFERENT TRADING AC COUNTS I.E. TRADING ACCOUNT FOR THE PERIOD FROM 01-04-2011 TO 0 5-01-2012 AND FROM 06-01-2012 TO 31-03-2012 AND OBSERVED THAT THE APPELLANT HAD DECLARED HUGE G.P. AFTER SEARCH. IT I S NEEDLESS TO SAY THAT EXCISE DEPARTMENT IS CONCERNED WITH THE SA LES AND NOT WITH THE G.P. RATE. THE TURNOVER OF THE APPELLANT D URING THE PERIOD FROM 06-01-2012 TO 31-03-2012 WAS OF RS. 18. 50 CRORES ONLY WHEREAS TURNOVER FOR THE PERIOD FROM 01-04-201 1 TO 05-01- 2012 WAS OF RS. 63.96 CRORES. HENCE, THERE WAS NO R EASON FOR DECLARING HIGHER RATE OF G.P. IN THE POST-SEARCH PE RIOD AS OBSERVED BY THE ASSESSING OFFICER. 3.11.2] THE RATE OF GROSS PROFIT AS CALCULATED BY T HE ASSESSING OFFICER WAS FACTUALLY NOTCORRECT. SINCE, IN THE FIR ST PERIOD, THE ASSESSING OFFICER HAD TAKEN VALUATION OF OPENING ST OCK WHICH WAS ON THE BASIS OF AUDITED FINANCIAL STATEMENTS AN D HENCE, OPENING STOCK TAKEN AS ON 01-04-2011 WAS OF RS. 10,93,68,796/- WHICH DULY TALLIED WITH THE STOCK RE FLECTED IN THE AUDITED FINANCIAL STATEMENTS AND SIMILARLY CLOSING STOCK OF RS. 12,24,32,311/- WAS ALSO ON THE BASIS OF AUDITED FIN ANCIAL STATEMENTS FOR THE YEAR UNDER CONSIDERATION WHICH I NCLUDED STOCK OF RAW MATERIAL, FINISHED GOODS, WORK IN PROG RESS AND STORES & SPARES. HOWEVER, VALUATION OF CLOSING STOC K ON 05-01- 2012 WAS TAKEN ON THE BASIS OF TRIAL BALANCE AS ON 06-01-2012 AT RS. 7,87,63,230/- WHICH WAS NOT CORRECT SINCE TH E SAID VALUATION WAS NOT DONE PROPERLY IN THE MID OF THE Y EAR. THE APPELLANT ALSO EXPRESSED ITS DIFFICULTIES IN PREPAR ING TWO TRADING ACCOUNTS IN A VERY SHORT PERIOD I.E. IN ONE DAYS T IME WHILE FILING ITS REPLY AGAINST THE SHOW CAUSE NOTICE AS ISSUED. 3.11.3] QUANTITY DETAILS OF STOCK OF RAW MATERIAL, FINISHED GOODS, WORK IN PROGRESS AND STORES & SPARES FROM 01-04-201 1 TO 05- 01-2012 AND FROM 06-01-2012 TO 31-03-2012 HAD ALSO BEEN FILED BEFORE THE ASSESSING OFFICER ALONG WITH COPY OF STAY PETITION SINCE THE ASSESSING OFFICER DID NOT SEEK ANY COMMEN TS FROM THE APPELLANT ON HIGHER RATE OF GROSS PROFIT DURING THE POST-SEARCH PERIOD. 3.11.4] THE AMOUNT OF PURCHASES AS CONSIDERED BY TH E ASSESSING OFFICER DURING THE FIRST PERIOD WAS OF RS . MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 15 46,96,09,143/-. HOWEVER, THE CORRECT AMOUNT OF PURC HASES WAS OF RS. 46,86,09,143/- ONLY. HENCE, THE SAID AMOUNT REQUIRES TO BE MODIFIED IN THE ASSESSMENT ORDER. 3.11.5] THAT IN THE TRIAL BALANCE, THE AMOUNT OF DI RECT EXPENSES INCLUDED THE POWER EXPENSES ONLY TILL 24-12-2011. T HE AMOUNT OF POWER EXPENSES FOR THE PERIOD FOM 24-12-2011 TO 05-01-2012 NEEDS TO BE INCORPORATED IN THIS PERIOD WHICH CALCU LATED COMES TO RS. 55,26,744/-. THUS, DIRECT EXPENSES FOR FIRST PERIOD REQURIES TO BE INCREASED BY THE AMOUNT OF RS. 55,26 ,744/- AND CORRESPONDING AMOUNT REQUIRES TO BE REDUCED FROM TH E FIGURESOF THE PERIOD FROM 06-01-2012 TO 31-03-2012. 3.11.6] THAT VARIOUS OTHER EXPENSES WHICH RELATED T O THE PERIOD TILL 05-01-2012 BUT DEBITED IN THE BOOKS OF ACCOUNT S AFTER 06-01- 2012 ON RECEIPT OF THE BILLS REMAINED TO BE CONSIDE RED IN FIRST PERIOD. 3.11.7.1] THAT ON THE BASIS OF REVISED VALUATION, T HE PERCENTAGE OF G.P. RATE FOR THESE TWO PERIODSIS CALCULATED AS UNDER: [I] TRADING ACCOUNT FOR THE PERIOD FROM 01-04-2011 TO 05- 01-2012: OPENING STOCK 10,93,68,7 96 BY SALES 63,96,04, 197 PURCHASES 46,86,09,1 43 BY CLOSING STOCK 10,60,03, 126 DIRECT EXPENSES 15,68,27,2 21 POWER EXP [24-12 TO 05-01] 55,26,744 GROSS PROFIT 52,75,419 74,56,07,3 23 74,56,07, 323 PERCENTAGE OF GROSS PROFIT 0.82% [II] TRADING ACCOUNT FOR THE PERIOD FROM 06-01-2012 TO 31- 03-2012: OPENING STOCK 10,60,03,1 BY SALES 18,50,51, MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 16 26 938 PURCHASES 15,89,81,2 44 BY CLOSING STOCK 12,24,32, 311 DIRECT EXPENSES 4,57,98,19 7 GROSS PROFIT [32,98,318 ] 30,74,84,2 49 30,74,84, 249 PERCENTAGE OF GROSS PROFIT [-] 1.78% 3.11.7.2] THAT DUIRNG THE FIRST PERIOD, THE APPELLA NT HAD SHOWN GROSS PROFIT AT 0.82% AND DURING THE SECOND PERIOD IT HAD SHOWN GROSS LOSS AT 1.78%. THE EXPENSES AS RELATED TO THE PERIOD PRIOR TO 05-01-2012 WHICH WERE DEBITED DURIN G THE SECOND PERIOD WAS THE MAIN REASON FOR VARIATION IN THE PERCENTAGE OF GROSS PROFIT OF FIRST AND SECOND PERI OD. HOWEVER, IT IS CLEAR THAT THE APPELLANTWAS HAVING PROFITS AND W AS NOT INCURRING LOSSES AS MENTIONED BY THE ASSESSING OFFI CER IN THE ASSESSMENT ORDER DURING THE FIRST PERIOD. THE VALUA TION OF CLOSING STOCK AS ON 05.01.2012 CAN ALSO BE VERIFIAB LE FROM THE QUANTITY AS SHOWN IN THE BOOKS AS ON 05-01-2012 BY MULTIPLYINGIT WITH THE RATE AS ADOPTED AT THE TIME OF FINALISATION OF THE STOCK AS ON 31.03.2012. 3.11.7.3] THAT IN VIEW OF THE ABOVE, THE VALUATION OF CLOSING STOCK AS CONSIDERED ON 05-01-2012 BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WAS NOT CORRECT. THE SAME NEED TO BE REPLACED BY THE CORRECT VALUATION. THE VALUATION AS CONSIDERED ON 05-01-2012 IN THIS LETTER WAS ALSO ON THE BASIS OF RATES AS CONSIDERED AT THE TIME OF FINALISATION AS ON 31.03. 2012 AND STOCK OF RAW MATERIAL OF SCRAP ON FIFO BASIS. THUS, OBSERVATION OF THE ASSESISNG OFFICER THAT THE APPELLANT INCURRE D LOSSES TILL 05- 01-2012 AND THEREAFTER SHOWED HUGE PROFITS WAS FACT UALLY NOT CORRECT. 3.11.8] THAT IN VIEW OF THE ABOVE, THE TENTATIVE R ATE OF GROSS PROFIT AS CALCULATED WAS OF 0.82% AND [-] 1.78% ON LY AND NOT AS CALCULATED ON PAGE NO. 28 OF THE ASSESSMENT ORDER. HENCE, ON THE BASIS OF WRONG OBSERVATION, THE RATE OF G.P.WAS SUBSTITUED MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 17 AND THEREFORE ADDITION MADE ON ACCOUNT OF LOW G.P. RATE WAS NOT PROPER. 3.12.1] THAT IN THE YEAR UNDER CONSIDERATION, THE G ROSS PROFIT RATE AS DECLARED BY THE APPELLANT AND BY M/S SHIVAN GI ROLLING MILLS P LIMITED WAS AS UNDER: S.NO DESCRIPTION ANANT STEELS P LTD SHIVANGI ROLLING MILLS P LTD 1 TURNOVER 82,56,87,721 63,59,81,407 2 GROSS PROFIT 25,98,878 -1,09,75,674 3 % OF RATE OF GROSS PROFIT 0.31% [-] 0.0173% 3.12.2] THAT IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE G.P.RATE IN THE CASE OF APPELLANT WAS AT 0.31% BUT IN FACT IT W AS NEGATIVE IN CASE OF M/S SHIVANGI ROLLING MILLS P LIMITED. HENCE , THERE WAS NO JUSTIFICATION FOR ADOPTING THE RATE OF GROSS PRO FIT OF 5% AS DECLARED IN THE CASE OF M/S JAIDEEP ISPAT & ALLOYS P LIMITED. 3.12.3] THE ASSESSING OFFICER ALSO GROSSLY ERRED IN APPLYING THE GROSS PROFIT RATE ON ALLEGED UNACCOUNTED SALES EVEN WHEN IT WAS CLAIMED BY THE APPELLANT THAT NO GOODS WERE SOLD BY IT OUT OF ITS BOOKS OF ACCOUNTS. HOWEVER, IN ANY CASE, THE ADDITI ON CAN BE MADE ONLY IN RESPECT OF NET PROFIT AND NOT IN RESPE CT OF GROSS PROFIT AS CONSIDERED BY THE ASSESSING OFFICER. 3.13.1] THAT HON'BLE CHENNAI BENCH OF ITAT IN THE C ASE OF C.V. SUNNY VS ACIT REPORTED IN 7 DTR 478 HAS HELD (REFER PARAS 44 & 45): 44. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE ARE OF THE OPINION THAT ESTIMATION OF INCOME CANNOT BE MADE ON THE BASIS OF CERTAIN DISCREPANCY NOTICED BY THE SEARCH PARTY IN THE COURSE OF SEARCH PROCEEDINGS. IN OUR OPINION, THERE IS NO JUSTIFICATION FOR MAKING ESTIMATION OF UNDISCLOSED INCOME. SINCE WE HAVE HELD THAT THERE IS NO JUSTIFICATION FOR EST IMATION OF INCOME, THERE IS NO QUESTION OF CONSIDERING THE BAS IS FOR ESTIMATION, WHETHER ON GP OR NET PROFIT. WITHOUT PR EJUDICE TO THIS FINDING , WE ARE OF THE OPINION THAT IF AT ALL THE INCOME IS TO BE ESTIMATED, IT HAS TO BE DONE ON THE BASIS OF NET PROFIT ONLY AND NOT ON THE BASIS OF GP . WE PLACE RELIANCE ON MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 18 THE DECISION OF THE TRIBUNAL, INDORE BENCH IN THE C ASE OF EAGLE SEEDS & BIOTECH LTD VS. ASSTT CIT (2006) 102 TTJ (I NDORE) 1065: (2006) 100 ITD 301(INDORE) WHEREIN AT PAGE 320 IT W AS HELD THAT THE AO WAS NOT JUSTIFIED IN APPLYING GP RATE I N THE MATTER AND DIRECTED THE AO TO APPLY NET PROFIT RATE AS DIS CLOSED BY THE APPELLANT IN THE BOOKS OF ACCOUNTS. SIMILAR DECISIO N WAS TAKEN IN THE CASE OF MADANLALNARENDRA KUMAR VS ITO ( 1988 ) 31 TTJ 401 ( SIC). ALSO WE RELY ON THE JUDGMENT OF THE MAD HYA PRADESH HIGH COURT IN THE CASE OF CIT VSBALCHANDAJIT KUMAR ( 2004) 186 CTR (MP) 419: (2003) 263 ITR 610(MP). THE LEARNED C IT(A) HIMSELF HAD OBSERVED IN PARA 3.8.1 THAT ONLY NET PR OFIT HAS TO BE ADOPTED AND AGREED WITH THE CONTENTION OF THE APPEL LANT. BUT HOWEVER IN FINAL FINDING, HE HAS OBSERVED THAT IT I S TO BE TAKEN AT GP ONLY. THERE IS A CONTRADICTION IN HIS OBSERVA TION AND HENCE WE CANNOT CONFIRM THIS FINDING OF THE CIT(A). 3.13.2] THAT HON'BLE JURISDICITONAL HIGH COURT IN T HE CASE OF CIT VS BAL CHAND AJIT KUMAR AS REPORTED IN 263 I TR 0610 HAS HELD THAT [REFER PARA 6 OF THE ORDER]: 6. WE ARE IN RESPECTFUL AGREEMENT WITH THE AFORESAID O PINION INASMUCH AS THE TOTAL SALE CANNOT BE REGARDED AS TH E PROFIT OF THE APPELLANT. THE NET PROFIT RATE HAS TO BE ADOPTE D AND ONCE A NET PROFIT RATE IS ADOPTED, IT CANNOT BE SAID THAT THERE IS PERVERSITY OF APPROACH. WHETHER THE RATE IS LOW OR HIGH, IT WOULD DEPEND UPON THE FACTS OF EACH CASE. IN THE PRESENT CASE NET PROFIT RATE OF FIVE PER CENT, HAS BEEN APPLIED. WE DO NOT THINK IT APPROPRIATE THAT THE SAME REQUIRES TO BE ENHANCED. WE ARE ALSO INCLINED TO THINK THAT IT IS HIGH. IN ANY CASE, IT CANNOT BE SAID THAT THERE HAS BEEN PERVERSITY OF APPROACH. 3.13.3] THAT IN THE PRESENT CASE IN HAND, THE APPEL LANT HAD NEGATIVE INCOME FROM ITS MANUFACTURING ACTIVITI ES AND PROFIT WAS DERIVED FROM OTHER INCOME. HENCE, FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT, NO ADDITION IS TO BE MADE EVEN ON ACCOUNT OF NET PROFIT THEORY. 3.14.1]THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HEAVILY RELIED ON THE SHOW CAUSE NOTICE AS ISSUED B Y THE HONBLE COMMISSIONER OF CENTRAL EXCISE. IT IS NEEDL ESS TO SAY THAT SHOW CAUSE NOTICE AS ISSUED BY THE HONBLE COM MISSIONER MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 19 WAS PRIMA FACIE AN OBSERVATION OF THE OFFICER AND W AS ISSUED TO THE APPELLANT TO FURNISH ITS COMMENTS ON THE OBSERV ATION SO MADE IN THE SHOW CAUSE NOTICE. THE SHOW CAUSE NOTIC E IS NOT A FINAL DOCUMENT WHICH CAN BE RELIED BUT IT CONTAINS PRIMA FACIE OBSERVATIONS OF THE CONCERNED AUTHORITY ISSUING THE SAME. 3.14.2] HOWEVER, HONBLE CESTAT VIDE ITS ORDER DATE D 27-09- 2018 SET-ASIDE THE SHOW CAUSE NOTICE AS ISSUED BY L D COMMISSIONER OF CENTRAL EXCISE AND THREFORE ADDITIO N AS MADE BASED ON THAT SHOW CAUSE NOTICE NOW REQUIRES TO BE DELETED IN FULL. 3.14.3] THE AMOUNT OF GROSS PROFIT AS ESTIMATED ON THE AMOUNT OF TOTAL TURNOVER WAS NOT JUSTIFIED SINCE THE UNREC ORDED TURNOVER AS TAKEN ON THE BASIS OF SHOW CAUSE NOTICE AS ISSUE D BY THE EXCISE DEPARTMENT NOW REQUIRES TO BE IGNORED AND TH E PERCENTAGE OF GROSS PROFIT AS DECLARED BY THE APPEL LANT REQURIES TO BE ACCEPTED AS SUCH. 3.15] THAT IN VIEW OF THE ABOVE, IT CAN BE CONCLUDE D THAT THE LD CIT[A] REDUCED THE PERCENTAGE OF GROSS PROFI T FROM 5% TO 2% WHICH WAS ALSO NOT JUSTIFIABLE. SINCE THE APPELLANT EARNED GROSS PROFIT AT 0.31% AND IN CASE OF SHIVANGI ROLLING MILLS P LIMITED, LOSSES WERE INCUR RED AND THEREFORE ADDITION AS MADE BY THE ASSESSING OFF ICER AND AS MAINTAINED BY THE LD CIT[A] TO AN EXTENT WAS LEGALLY NOT JUSTIFIABLE. THE SAME NOW REQURIES TO B E DELETED IN FULL. 3.4.1] THE LD CIT (A) IN HIS ORDER DATED 31-03-2016 IN PARA 7.5 ON INNER PAGE NO. 71 REPRODUCED A TABLE IN RESP ECT OF RATE OF GROSS PROFIT AS DECLARED IN THE ASSESSMENT YEAR 2007-08 AND ALSO IN THE ASSESSMENT YEAR 2012-13 WHICH IS AS UNDER: S.NO DESCRIPTION 2007 - 08 2012 - 13 ANANT STEEL SHIVANGI ANANT STEEL SHIVANGI 1 SALES 33,61,43,746 25,16,61,959 82,56,87,721 63,59,81,407 2 GROSS PROFIT 1,14,58,944 79,20,096 25,98,878 - 1,09,75,674 3 % OF GROSS PROFIT 3.40% 3.14% 0.31% - 0.0173% 4.1 AS 4.96% 4.58% 5% - 0.0173% MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 20 CONSIDERED BY THE AO 4.2 AS REDUCED BY THE LD CIT(A) 3% 3% 4.3 AS MAINTAINED BY THE HONBLE ITAT 3.3% 3.3% 3.4.2] THE PERCENTAGE OF GROSS PROFIT IN THE CASE O F THE ASSESSEE COMPANY WAS 3.40% IN THE ASSESSMENT YEAR 2 007-08 AND THE SAME WAS RESTRICTED TO 3.30% IN CASE OF UNA CCOUNTED TURNOVER IN THAT YEAR BUT BOOK RESULT AS DECLARED B Y THE ASSESSEE COMPANYWAS NEITHER DISTURBED BY THE ASSESS ING OFFICER NOR BY ANY OF THE APPELLATE AUTHORITY. 3.5] THAT IN VIEW OF THE ABOVE DISCUSSION, PERCENTA GE OF GROSS PROFIT OF 0.31% AND NET PROFIT OF 0.29% AS DECLARED BY THE ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION RE QUIRES TO BE ACCEPTED IN LIGHT OF THE DECISION OF THE HONBLE ITAT IN THE CASE OF THE APPELLANT ITSELF FOR THE ASSESSMENT YEA R 2007-08. THE DIRECTION OF THE HONBLE BENCH SO AS TO ADOPT T HE NET PROFIT RATE OF 3.30% IN THIS YEAR ON THE AMOUNT OF TURNOVE R AS DISCLOSED IN THE BOOKS OF ACCOUNTS ON THE BASIS OF ORDER AS PASSED IN THE CASE OF THE ASSESSEE COMPANY ITSELF F OR THE ASSESSMENT YEAR 2007-08 IS A MISTAKE APPARENT FROM RECORDS AND THEREFORE HONBLE BENCH IS HEREBY REQUESTED TO RECALL ITS ORDER AND DECIDE THIS GROUND OF APPEAL AFRESH. 5. LD. SR. DR OPPOSED THE ABOVE SUBMISSION AND SUBMITTED THAT THE TRIBUNAL HAD RECORDED A FINDING OF F ACT AND REACHED TO THE PARTICULAR CONCLUSION, THEREFORE, NO W AT MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 21 THIS STAGE, THE ORDER OF THE TRIBUNAL SHOULD NOT BE R EVIEWED AS THE TRIBUNAL WHILE DECIDING THE ORIGINAL APPEAL HAD ALREADY CONSIDERED THE FACTS. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEES GRIEVANCE IS THAT THE PERCENTAGE OF G.P. OF THE ASSESSEE CO. WAS 3.40% IN THE ASSESSMENT YEAR 2007-08 AND THE SAME WAS RESTRICTED TO 3.30% IN CASE OF UNACCOUNTED TURNOVER IN THAT YEAR BUT BOOK RESULT AS DECLARED BY THE ASSESSEE CO. WAS NEITHER DISTURBED BY THE ASSESSING OFFICER NOR BY ANY OF THE APPELLATE AUTHORITY . WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE ASSESSEE I N VIEW OF THE FINDING OF FACT RECORDED BY THE LD. CIT(A) TH AT THE FACTS AND CIRCUMSTANCES FOR THE ASSESSMENT YEAR 2007-08 WERE ENTIRELY DIFFERENT FROM THE FACTS AND CIRCUMSTANC ES OF THE YEAR UNDER APPEAL. HENCE, THE PROFIT ADOPTED FOR TH AT YEAR CANNOT MECHANICALLY BE ADOPTED FOR THE YEAR UNDER MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 22 APPEAL AS THIS TRIBUNAL HAS ALREADY CONSIDERED THE FACTS ON RECORD AND EXPRESSED ITS VIEW. THE CASE-LAWS RELIED U PON BY THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRE SENT CASE AS THE POWERS OF TRIBUNAL U/S 254(2) OF THE ACT F OR RECTIFICATION OF MISTAKE ARE NOT WIDE ENOUGH TO REVIS IT CONSCIOUSLY TAKEN DECISION. THE ASSESSEE BY WAY OF P RESENT APPLICATION IS SEEKING REVIEW OF ORDER, WHICH IS NOT PERMISSIBLE UNDER THE LAW. THIS VIEW IS SUPPORTED B Y THE RATIO LAID DOWN IN THE FOLLOWING DECISIONS: KARAN & CO. (253 ITR 131) (DEL), NIRANJAN & CO. LTD. VS. ITAT (122 ITR 519) (CAL), CIT VS. ITAT (196 ITR 640) (ORI), CIT VS. SUMAN TEA & PLYWOOD INDUSTRIES P. LTD., 226 ITR 34 (CAL). 6. IF SUCH PRAYER IS ALLOWED THEN IN EVERY CASE, WH ERE THE ASSESSEE IS NOT SATISFIED WITH THE FINDING OF THE T RIBUNAL, THE MA WILL BE FILED. IN OUR CONSIDERED VIEW, POWERS U/ S 254(2) ARE VERY LIMITED WHICH COULD ONLY BE EXERCISED TO RECTI FY ANY MA NO.47/IND/2019 ANANT STEEL PVT. LTD. 23 MISTAKE OR FACT APPARENT FROM THE RECORD. BUT, WHER E THE TRIBUNAL HAS APPLIED ITS MIND AND COMES TO A PARTIC ULAR CONCLUSION THEN DISTURBING SUCH FINDING WOULD TANTA MOUNT TO REVIEW THE ORDER. SUCH EXERCISE WOULD EVEN BE CONTR ARY THE SCHEME OF ACT AS THE ORDER OF TRIBUNAL IS APPEALABL E U/S 260A OF THE ACT BEFORE THE HON'BLE HIGH COURT. IN VIEW O F THESE FACTS, THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE HA S NO MERIT. 7. IN RESULT, THIS MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON16.1.2020. SD/- (MANISH BORAD) ACCOUNTANT MEMBER SD/- ( KUL BHARAT) JUDICIAL MEMBER DA TED : 16.1.2020 ! VYAS ! COPY TO: ASSESSEE/RESPONDENT/CIT(A)/CIT/DR, INDORE