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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘B’
Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH
PER RAJPAL YADAV, JUDICIAL MEMBER: Revenue is in appeal before the Tribunal against order of ld.CIT(A)-2, Vadodara dated 30.8.2017 passed for the assessment year 2008-09.
Though Revenue has taken four grounds of appeal, but in brief its grievance is that the ld.CIT(A) has erred in deleting the addition of Rs.3,47,78,975/-.
The ld.counsel for the assessee at the very outset submitted that the issue in dispute is squarely covered in favour of the assessee by the order ITAT passed in 2607 & 2608/Ahd/2015 for the Asstt.Years 2006-07 and 2009-10 in the assessee’s own case. In brief the facts are that the AO
2 has received an information from DGCEI, Ahmedabad who have conducted an investigation with respect to escapement of exercise duty. On the basis of that information, it was harboured by the AO that the assessee has removed excisable goods from its premises without payment of excise duty, and thus, a sale to the extent of Rs.13,91,15,901/- is out of books. On the strength of show cause notice issued by the Excise Department, the ld.AO worked out unaccounted sale of Rs.13,91,15,901/- and adopted a profit element at 25% of such sales. Accordingly, he made addition of Rs.3,47,78,975/-. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld.CIT(A) who deleted the addition by observing as under: “4. I have carefully considered the facts on records and submission of the Ld. Authorized Representative including the orders of CE&STAT, ITAT, and CIT(A)-2, Vadodara in, the case of appellant for earlier years. 4.1. The only ground of appeal in e-appeal pertains to the addition of Rs.3,47,78,975/- made on account of gross profit at 25% of the unaccounted sales worked out on the basis of search operation carried out by Central Excise Department. I have also gone through the order of Hon'ble Customs Excise & Service Tax Appellate tribunal dated 12.05.2015 which is placed on record. It is noticed that this order pertains to 35 assessees and name of the appellant has been incorporated as Prime Ceramics Pvt. Ltd. at Sr. No. X with Appeal No. E/672/2011. After considering the arguments of both the parties, the Hon'ble CESTAT has summarized three issues for adjudication vide para-6 of its order which are reproduced as under: -
6. In these proceedings the following issues are required to be deliberated upon:- (i) Whether the appellants mentioned in para 5.1 above have indulged in clandestine manufacture and clearance of Ceramic Glazed Mixture (Frit), in view of the adjudication orders passed the adjudicating authorities on the basis of natural gas consumption norms per metric ton? (ii) Whether the appellants mentioned in Para 5.1 and 5.2 have indulged in undervaluation of frit and also clandestinely cleared
3 frit as per a personal ledgers retrieved from a pen-drive recovered from SANYO and other personal records and pen- drives from the ceramic tile manufacturers read with their statements?
(iii) Whether the adjudicating authorities were justified in denying cross-examination of witness under the provisions of section 9D of the Central Excise Act, 1944 read with the judicial pronouncements on the issue?"
The perusal of the order reveals that all the above mentioned issues have been decided in favour of Central Excise assessees and accordingly all the appeals were allowed by the Hon'ble CE&STAT. Similar addition was made in earlier years also and my predecessor vide order dated 11.06.2015 contained in Appeal No. CAB/(A)-2/073/2014-15 has deleted the same in A.Y. 2006-07 after recording his findings in para-5 and 6 of the order which are reproduced as under:-
"5. I have considered the submission of the appellant and the AO's observations made in the assessment order. A perusal of the assessment order u/s. 143(3) rws 147 of the IT Act, 1961 shows that the AO has made the addition by estimating the Gross Profit on the unaccounted sales determined by the Excise Authority. For this purpose, the AO has completely relied upon the demand cum show cause notice issued by the DGCEI, Ahmedabad and the order passed by the Commissioner of Central Excise, Vadodara-1 as mentioned above. For controverting the submissions made by the appellant during the course of assessment proceedings, the Assessing Officer has relied upon the information and documents supplied by the Excise Authority in the form of demand cum show cause notice and have also reproduced relevant parts of such demand cum show cause notice in her assessment order. This demand cum show cause notice as well as the order passed by the Commissioner of Central Excise, Vadodara-1 has been quashed by a combined order passed by the CESAT Ahmedabad vide Order No. A/10541-10571/2015 dated 12.05.2015 in the case of appellant as well as 34 other assessees. Once demand cum show cause notice and the order of Commissioner of Central Excise on the basis of which the assessment order u/s. 143(3)/147 had been passed, are quashed, the addition made in the assessment order by relying upon the demand cum show 4 cause notice and the order of the Excise Commissioner has to be automatically deleted, if it is found that the basis of addition made by the AO is solely upon such documents furnished by the Excise Authority and no independent enquiries had been undertaken by the AO under the provisions of IT Act, 1951. This is as per the ratio laid down by the decision of the Hon'ble High Court of Delhi in the case of Vimal Moulders (I) Ltd. 330 ITR 214 (Delhi) and decision of the Hon'ble High Court of Madras in the case of Vignesh Kumar Jewellers 222 CTR (Mad) 29. Accordingly, the addition made by the AO is directed to be deleted.
6. As a result, the appeal is allowed."
4.2. Since the facts are identical, I have followed the order of my predecessor in A.Y. 2007-08. Undisputedly, facts are identical in this year also as the unaccounted sales have been determined on the basis of demand-cum-show cause notice issued by DGCEI, Ahmedabad which already stands quashed by the CE&STAT, Ahmedabad vide order dated 15.05.2015. 4.3. In view of the above facts and circumstances of the case, thus it is clear that the unaccounted sales determined by the Central Excise Authorities have been already deleted and, hence the addition made by the Assessing Officer in the present Income-tax proceedings solely on the basis of orders of Central Excise Authorities has no legs to stand. Accordingly following the order of my predecessor in A.Y. 2006-07 and my order dated 07.08.2015 of A.Y. 207-08, I hold that no addition can now be sustained in the case of the appellant and hence the addition made by the Assessing Officer at Rs.3,47,78,975/- is directed to be deleted. Thus, the appellant succeeds in respect of ground of appeal raised.
5. In the result, the appeal of the assessee is Allowed.”
4. A perusal of the above would indicate that the ld.CIT(A) has placed reliance upon the order passed by his predecessor in the Asstt.Year 2006-07. This order of the predecessor in the Asstt.Year 2006-07 has been upheld by the Tribunal in ITA No.2607/Ahd/2015. Copy of the Tribunal’s order has been placed on record.
5. On due consideration of the above facts, and in the light of ITAT’s order dated 16.10.2018 in Asstt.Year 2006-07 and 2009-10, we are of the view that estimation of sales at Rs.13,91,15,901/- by the AO was made only on the basis of a show cause notice issued by the excise department. Evidence possessed by the AO is insufficient, and on the basis of such evidence, sales out of books cannot be estimated and cannot be worked out. While considering this evidence in the Asstt.Year 2006-07, the Tribunal has observed that identical search was conducted by the Excise Department upon different ceramic product manufacturers, and dispute at their end travelled upto the Hon’ble Supreme Court also. Decision of the Hon’ble Supreme Court in Civil Appeal No.39019/2015 passed in the case of Commissioner of Central Excise & ST Vs. Zirconia Cera Tech Glazes P.Ltd. has also been made. Similarly reliance has been placed upon the decision of Hon’ble Gujarat High Court in considering this material vis-à-vis material referred by the ld.AO. We are satisfied that the ld.CIT(A) has considered the issue judiciously and no interference is called for. In view of the above discussion, appeal of the Revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the Court on 1st October, 2019 at Ahmedabad.