ITO v. Arora Alloys Ltd. - Taxpublishers.in

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The Tax Publishers2012 TaxPub(DT) 0853 (Chd-Trib) : (2011) 012 ITR (Trib) 0263 INCOME TAX ACT, 1961 --Income from undisclosed sources--Addition under section 69CAddition on the basis of director's statement recorded by the central excise authorities--The assessee-company was engaged in the manufacture of non-alloy/alloy steel ingots in the years under appeal. On 25-3-2004, the central excise authorities visited the premises of the assessee and verified the last heat tapped at 08:20 hrs. on 25-3-2004, i.e., the date of their visit. They also found 45 ingots lying in the premises as against production of only 37 ingots weighing 3.920 mts. shown in the log sheet on 25-3-2004. During the course of inspection, statement of H, director in the assessee-company, was recorded. Based on his statement, case was made out by the Central Excise Department that the assessee had increased the capacity of its furnace in December 2003 from 4 mts. per heat to 5 mts per heat and had clandestinely manufactured and cleared 624 mts. of non-alloy steel ingots from December 2003 to 24-3-2004 without accounting them in the record and without payment of central excise duty. Accordingly, central excise duty was imposed on 624 mts. allegedly produced from December 2003 to 24-3-2004. The statement recorded by the central excise authorities formed the basis for coming to the conclusion that the assessee had produced and cleared 624 mts. of non-alloy ingots from December 2003 to 24-3-2004 on the basis of the fact that the capacity of the furnace was increased in December 2003 from 4 mts. per heat to 5 mts. per heat and consequently 624 mts. were tapped without recording the same in the books. On the basis of the aforesaid information, the AO initiated the proceedings under section 147/148 and accordingly reopened the assessment. The assessment under section 147/148 was completed an 30-11-2006 by AO the total income of the assessee at Rs. 93,88,580 which comprises of two additions, namely, (1) addition of Rs. 32,59,650 being gross profit on sales of 624 mts. (sales being Rs. 10,02,19,021) outside the books; and (2) addition of Rs. 69,59,370 under section 69C, being unexplained expenditure in purchase of raw material utilised in generating unaccounted production and sale of 624 mts. On a perusal of the assessment order, it shows that the AO has passed order of reassessment making impugned additions solely on the basis of statement of H recorded by the central excise authorities on 25-3-2004. The AO has brought no other material on record to support the impugned addition. Aggrieved by the additions made by the AO, the assessee filed appeal before the Commissioner (Appeals). The assessee sought to file a few pieces of additional evidence before the Commissioner (Appeals). They are, (1) the order dated 21-4-2006 passed by the Commissioner (Appeals), Cental Excise and Customs, Chandigarh, by which he cancelled the duty and penalty imposed on the assessee-company on excess production of 624 mts; (2) certificate from chartered engineer to the effect that the capacity of furnace was 4 mts for which the electricity load of 2050 kw was required; and (3) copy of inspection report dated 25-11-2005 recorded in daily stock register on the basis of inspection carried out by the Central excise authorities in which it is stated that the installed capacity of the furnace was 4 mts. After giving opportunity to the AO, the Commissioner (Appeals) admitted the aforesaid pieces of additional evidence. The AO, however, preferred to stand by the assessment order, instead of rebutting the additional evidence. After considering the submissions of the assessee, the submissions made by the AO and the materials available on record, the Commissioner (Appeals) held that the circumstances surrounding the case supported the claim of the assessee that the installed capacity of the furnace was only 4 mts and not 5 mts. In this view of the matter, he deleted the impugned additions. Aggrieved by the order passed by the Commissioner (Appeals), the Department filed appeal before this Tribunal. When the said appeal came up for hearing, it was argued by the department that the order passed by the Commissioner (Appeals) Customs and Central Excise has not attained finality and therefore, the Commissioner (Appeals) was hot justified in deleting the impugned addition on the basis of the order passed by the Commissioner (Appeals), Central Excise and Customs. The aforesaid submission was noted by this Tribunal in paragraph 4 of its order dated 11-7-2008. This Tribunal set aside the order of the Commissioner (Appeals) and restored the matter to the file of the AO to decide the matter afresh in the light of the final outcome in the central excise proceedings. The aforesaid order passed by this Tribunal, on appeal by the department, has been set aside by the High Court and the matter restored to the Tribunal for a decision on merits. *Held:* The statement of director was not recorded by the income-tax authorities but by the central excise authorities. As held by the High Court, proceedings under the Central Excise Act has relevance only for formation of opinion of escapement of income and thereafter the income-tax authorities had to independently finalise the reassessment, irrespective of the final view in excise proceedings. Impugned addition was, therefore, to be cancelled as the statement of H cannot, by itself, form the basis for making the impugned additions. The AO had given no other basis to support the additions made by him. In this view of the matter, the order passed by the Commissioner (Appeals) in this behalf was confirmed. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0853 (Chd-Trib) : (2011) 012 ITR (Trib) 0263

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 69CAddition on the basis of director's statement recorded by the central excise authorities--The assessee-company was engaged in the manufacture of non-alloy/alloy steel ingots in the years under appeal. On 25-3-2004, the central excise authorities visited the premises of the assessee and verified the last heat tapped at 08:20 hrs. on 25-3-2004, i.e., the date of their visit. They also found 45 ingots lying in the premises as against production of only 37 ingots weighing 3.920 mts. shown in the log sheet on 25-3-2004. During the course of inspection, statement of H, director in the assessee-company, was recorded. Based on his statement, case was made out by the Central Excise Department that the assessee had increased the capacity of its furnace in December 2003 from 4 mts. per heat to 5 mts per heat and had clandestinely manufactured and cleared 624 mts. of non-alloy steel ingots from December 2003 to 24-3-2004 without accounting them in the record and without payment of central excise duty. Accordingly, central excise duty was imposed on 624 mts. allegedly produced from December 2003 to 24-3-2004. The statement recorded by the central excise authorities formed the basis for coming to the conclusion that the assessee had produced and cleared 624 mts. of non-alloy ingots from December 2003 to 24-3-2004 on the basis of the fact that the capacity of the furnace was increased in December 2003 from 4 mts. per heat to 5 mts. per heat and consequently 624 mts. were tapped without recording the same in the books. On the basis of the aforesaid information, the AO initiated the proceedings under section 147/148 and accordingly reopened the assessment. The assessment under section 147/148 was completed an 30-11-2006 by AO the total income of the assessee at Rs. 93,88,580 which comprises of two additions, namely, (1) addition of Rs. 32,59,650 being gross profit on sales of 624 mts. (sales being Rs. 10,02,19,021) outside the books; and (2) addition of Rs. 69,59,370 under section 69C, being unexplained expenditure in purchase of raw material utilised in generating unaccounted production and sale of 624 mts. On a perusal of the assessment order, it shows that the AO has passed order of reassessment making impugned additions solely on the basis of statement of H recorded by the central excise authorities on 25-3-2004. The AO has brought no other material on record to support the impugned addition. Aggrieved by the additions made by the AO, the assessee filed appeal before the Commissioner (Appeals). The assessee sought to file a few pieces of additional evidence before the Commissioner (Appeals). They are, (1) the order dated 21-4-2006 passed by the Commissioner (Appeals), Cental Excise and Customs, Chandigarh, by which he cancelled the duty and penalty imposed on the assessee-company on excess production of 624 mts; (2) certificate from chartered engineer to the effect that the capacity of furnace was 4 mts for which the electricity load of 2050 kw was required; and (3) copy of inspection report dated 25-11-2005 recorded in daily stock register on the basis of inspection carried out by the Central excise authorities in which it is stated that the installed capacity of the furnace was 4 mts. After giving opportunity to the AO, the Commissioner (Appeals) admitted the aforesaid pieces of additional evidence. The AO, however, preferred to stand by the assessment order, instead of rebutting the additional evidence. After considering the submissions of the assessee, the submissions made by the AO and the materials available on record, the Commissioner (Appeals) held that the circumstances surrounding the case supported the claim of the assessee that the installed capacity of the furnace was only 4 mts and not 5 mts. In this view of the matter, he deleted the impugned additions. Aggrieved by the order passed by the Commissioner (Appeals), the Department filed appeal before this Tribunal. When the said appeal came up for hearing, it was argued by the department that the order passed by the Commissioner (Appeals) Customs and Central Excise has not attained finality and therefore, the Commissioner (Appeals) was hot justified in deleting the impugned addition on the basis of the order passed by the Commissioner (Appeals), Central Excise and Customs. The aforesaid submission was noted by this Tribunal in paragraph 4 of its order dated 11-7-2008. This Tribunal set aside the order of the Commissioner (Appeals) and restored the matter to the file of the AO to decide the matter afresh in the light of the final outcome in the central excise proceedings. The aforesaid order passed by this Tribunal, on appeal by the department, has been set aside by the High Court and the matter restored to the Tribunal for a decision on merits. Held: The statement of director was not recorded by the income-tax authorities but by the central excise authorities. As held by the High Court, proceedings under the Central Excise Act has relevance only for formation of opinion of escapement of income and thereafter the income-tax authorities had to independently finalise the reassessment, irrespective of the final view in excise proceedings. Impugned addition was, therefore, to be cancelled as the statement of H cannot, by itself, form the basis for making the impugned additions. The AO had given no other basis to support the additions made by him. In this view of the matter, the order passed by the Commissioner (Appeals) in this behalf was confirmed.