DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, LUDHIANA , LUDHIANA vs. ROSHA ALLOYS PVT. LTD., MANDI GOBINDGARH

have been filed by the assessee and,\n3\nthereafter, finally, vide letter dated 12.05.2025, the fresh grounds of\nappeal have been filed and vide letter dated 10.05.2025 as filed during\nthe course of hearing, the Ld. Counsel sought to withdraw the original\ngrounds of appeal as filed along with the Form No.36, revised grounds\nof appeal filed on 27.02.2025 vide letter dated 22.02.2025 and\nadditional grounds of appeal filed on 10.05.2025.For the sake of\nconvenience, the revised grounds of appeal as filed by the appellant\nvide letter dated 12.05.2025 are being reproduced as under:\n1. On the facts and in law, the approval granted by the Id. Addl. CIT\nunder Section 148B is illegal and unsustainable, as a single approval order\ndated 30.03.2023 was issued for all three assessment years—AYs\n2018-19 to 2020-21 vide letter no.2384.\n2.\nThat the approval granted under Section 151 of the Income Tax Act is\nbad in law, void ab initio and without proper application of mind, as there\nexists not only a material discrepancy between the amount mentioned in the\nreasons recorded for reopening and the amount mentioned in the Annexure\nappended to the approval under Section 151 but also the Approving\nAuthority did not approve the basis as mentioned in the reasons recorded by\nAO. This variance indicates non-application of mind by the approving\nauthority and renders the sanction mechanical, invalid, and unsustainable in\nlaw, vitiating the entire reassessment proceedings as per binding judgement\nof Hon'ble Apex Court in the case of ACIT Vs Teleperformance Global Service\nPvt. Ltd., reported in 170 taxman.com 81.\n3.\nWithout prejudice to the above grounds, the learned CIT (A) has erred\nin law and on facts in applying a Gross Profit (GP) rate of 4% on the alleged\nbogus purchases, without appreciating that the disputed purchase amount\nincludes vat input credit amounting to Rs.7,34,299/- and Cenvat Credit\namounting to Rs.29,99,030, which were never claimed as an expenditure in\nthe Profit & Loss account. The action of the CIT(A) in applying the GP rate on\nthe gross amount (inclusive of VAT and Cenvat Credit) has resulted in an\ninflated and arbitrary addition, which is not sustainable either in fact or in law.\n3.1 The CIT(A) erred in appreciating the fact that the discount of\nRs.1,85,383/- had already been considered as income by the assessee. The\nCIT(A) did not take this into account, resulting in an incorrect addition of Rs.\n7,70,048/- to the income\n4.\nThe CIT(A) erred in partly sustaining the arbitrary estimation of excess\nproduction at 379 MT and unaccounted sales of Rs.1,13,70,000, based solely\non an assumed average power consumption of 737.50 units/MT. The\nestimation was made without any incriminating material found during the\nsearch and relied merely on statements of the accountant and chemist,\nwhich were later clarified by the chemist's affidavit explaining that electricity\nconsumption varies due to multiple factors.\n5.\nThat The Ld. CIT(A) has erred in confirming the action of the Assessing\nOfficer in rejecting the books of accounts u/s 145(3) on alleged bogus\npurchases as per finding given at page 68 of the order.\n4\n3.1 The grounds of appeal as taken by the Department are\nreproduced as under bearing ITA No. 921/Chd/2024:\n1. Whether upon facts and circumstances of the case and in law, the Ld. CIT\n(A) was justified to restricted the addition made by the A.O on account of\nsuppression of sales of Rs.11,77,50,000/- to 1,13,70,000/- by directing AO to\nconsider average annual power consumption per MT for six years by ignoring\nthe fact that authenticity of average annual power consumption data before\nthe date of search was not established/authenticated and also ignoring\nthe statement of Sh. Kunwar Vijyant, factory chemist and Sh. Santokh Singh,\nAccountant in which they had described the consumption of electricity units\nfor the production of 1 tonne of metal of finished products?\n2. Whether upon facts and circumstances of the case and in law, the Ld. CIT\n(A) was justified in deleting the addition of Rs.10,63,80,000/- by applying the\naverage of annual power consumption for the six years instead of monthly\naverage calculated by the A.O. on the basis of seized material and made\naddition u/s 69A of the Act accordingly?\n3. Whether upon facts and circumstances of the case and in law, the Ld. CIT\n(A) was justified in deleting the addition of Rs.10,63,80,000/- by applying the\naverage of annual power consumption for the six years and by failing to\nobtain the reasons for substantial increase in the turnover and decrease in\naverage annual power consumption after the period of search i.e. for AY\n2021-22 & AY 2022-23?\n4. Whether on facts and circumstances of the case and in law, the Ld. CIT (A)\nwas justified in deleting the addition of Rs.1,92,51,910/- on account of bogus\npurchases and directing the AO to apply the G.P. rate @ 4% on the bogus\npurchases of Rs.1,92,51,910/- made from M/s Neelkanth Steel & Allied\nIndustries, without any basis and completely ignoring the facts of the case?\nWhether on facts and circumstances of the case and in law, the (A) was\njustified in deleting the addition of Rs.1,92,51,910/- on account of bogus\npurchases and in holding that in case of bogus purchases only profit\nembedded in the transaction can be brought to tax without co- relating the\nbogus purchases to corresponding sales?\n6. Whether on facts and circumstances of the case and in law, (A) was\njustified in deleting the addition of Rs.1,92,51,910/- on account of bogus\npurchases and in holding that in case of bogus purchases only profit\nembedded in the transaction can be brought to tax without considering the\nfact that in the absence of quantitative details like stock register, the quantity\nof good sold and purchased, kanda receipts, the bogus purchases could be\nused to decrease the profit element?\n7. Whether on facts and circumstances of the case and in law, the Ld. CIT (A)\nwas justified in deleting the addition of Rs.1,92,51,910/- on account of\nbogus purchases and directing the AO to apply the G.P. rate @ 4% on the bogus\npurchases of Rs.1,92,51,910/- by incorrectly relying on the judgment in the\ncase of M/s Pooja Paper Trading Co (P.) Ltd. [264 Taxman 260] - High Court of\nBombay and Geolife Organics Vs. ACIT [58 ITR(T) 297)-ITAT Mumbai.\n8. The appellant craves leave to add, amend, modify, vary, omit or substitute\nany of the aforesaid grounds of appeal at any time before or at the time of\nhearing of the appeal.\n5\n4. It was stated before us that the sub and substance of the ground\nof appeal as filed vide letter dated 12.05.2025 remains the same and\nno new facts are required to be investigated. By relying upon the\njudgment of Hon'ble Apex Court in the case of National Thermal Plant\nvs. CIT reported in 229 ITR 383, it was requested for admission of\nadditional grounds of appeal as per letter dated 12.05.2025. The Ld.\nCIT(DR) did not raise any objection to the same and, accordingly, the\nappeal of the assessee is being decided on the basis of the grounds of\nappeal filed on 12.05.2025.\n5. The facts, in brief, as borne out from the order of the AO and Ld.\nCIT(A), are that there was search & seizure operation u/s 132 on the\nassessee 08.09.2021 and the cases for all the three years were\nreopened u/s 148.In response to the said notice u/s 148, the return was\nfiled at the same income as per the original return. The assessee is\nengaged in the business of Rolling Mill and the modus operandi of the\nmanufacturing activities is that the purchases are mode of iron scrap of\ndifferent qualities and sizes and the steel ingots are the finished\nproduct.\n6. The Ld. Counsel started his argument as per the grounds of\nappeal filed on 12.05.2025.The first ground of appeal relates to the\napproval as granted by the Ld. Addl. CIT u/s 148B, which was stated to\nbe illegal and unsustainable as single approval order dated 30.03.2023\nwas granted for all the three years i.e. AY 2018-19 to 2020-21 vide letter\nnumber 2384 as is borne out from order of the Assessing Officer page\n32.\n7. The Ld. Counsel of the assessee argued that approval have been\naccorded in 'mechanical manner' referred to the letter dated\n29.03.2023 vide letter number 895, which was forwarded by the\nAssessing Officer to the Addl. CIT, Central Range, Ludhiana which was\n6\nreceived in the office of Addl. CIT on the same day and on 30.03.2023,\nvide letter number 2384, the approval for all the years was granted by\nthe Addl. CIT, Central Range, Ludhiana. Similarly, the assessee further\nfiled evidences that, in the case of another concern M/s. Trimurti\nHomes Pvt. Ltd., the Ld. AO sought approval from the Addl. CIT, by way\nof a letter dated 29.03.2023 vide letter number 896.The said letter was\nreceived in the office of the Ld. Addl. CIT on 29.03.2023 and on\n30.03.2023, the approval was granted. It was also the case in respect of\n'Smt. Pushpa Devi' and 'Sh. Ashish Aggarwal' where on 29.03.2023, the\nsame AO had forwarded letter for the approval in the above two cases\nand on 30.03.2023, the Ld. Addl. CIT had granted the approval vide\nletter dated 30.03.2023, bearing number 2385. It was further argued\nthat the Ld. AO had issued show-cause notice in all the three years on\n23.03.2023 for compliance by 26.03.2023 and another show cause\nnotice was issued for applying corresponding GP rate on the alleged\nbogus purchases vide notice dated 28.03.2023 for compliance on\n29.03.2023 at 7:00PM.Similarly notices were issued for AY 2019-20 & 2020-\n21 as per common paper book pages 28 to 45 submitted before us,\nand, thus, it was argued that the reply to the 2ndshow cause notices\nwas to be submitted on 29.03.2023 by 7:00PM. The Ld. Counsel for the\nassessee further pointed out how it could be possible that the order\nwas prepared by the AO on 29th March, 2023 and transferred to Addl.\nCIT on the same day which reached the office of Addl. CIT on 30th\nMarch, 2023 and, then, the Ld. Addl. CIT would have applied his mind\non them. Voluminous record was there for all the three years, since it\nwas a search case and, also, all other cases as stated above were also\nsearch cases. Thus, it was argued that there was hardly any time for\njudicious application of mind by the Addl. CIT and, thus, it was merely a\nmechanical approval.\n7\n8. The Ld. Counsel submitted in his brief synopsis on this issue as\nunder:\n1)\nIt is respectfully submitted that the approval granted by the\nAdditional Commissioner of Income Tax under section 148B (or 153D,\nas applicable) is vitiated in law as it was accorded in a mechanical\nmanner without due application of mind. The scheme of the Act\nmandates the Additional CIT to discharge a quasi-judicial function by\nindependently evaluating the issues raised in the draft assessment\norder, examining the material relied upon by the Assessing Officer, and\nconsidering the explanations and documents submitted by the\nassessee in response. The Additional CIT is not bound by the\nconclusions drawn in the investigation wing's appraisal report or the\ndraft order, and is required to apply his own mind to determine the\nsustainability of proposed additions. The fact that approvals for\nmultiple assessment years were granted on the very same day on\nwhich the draft orders were received clearly indicates a perfunctory\nprocess, defeating the legislative intent behind the statutory safeguard\nof prior approval. Such mechanical approval renders the\nconsequential assessment order bad in law and unsustainable.\n2)\nIt is respectfully submitted that the approval granted by the\nAdditional Commissioner of Income Tax under section 148B (or 153D,\nas applicable) is vitiated in law as it was accorded in a mechanical\nmanner without due application of mind. The scheme of the Act\nmandates the Additional CIT to discharge a quasi-judicial function by\nindependently evaluating the issues raised in the draft assessment\norder, examining the material relied upon by the Assessing Officer, and\nconsidering the explanations and documents submitted by the\nassessee in response. The Additional CIT is not bound by the\nconclusions drawn in the investigation wing's appraisal report or the\ndraft order, and is required to apply his own mind to determine the\nsustainability of proposed additions. The fact that approvals for\nmultiple assessment years were granted on the very same day on\nwhich the draft orders were received clearly indicates a perfunctory\nprocess, defeating the legislative intent behind the statutory safeguard\nof prior approval. Such mechanical approval renders the\nconsequential assessment order bad in law and unsustainable.In view\nof the above, it is respectfully submitted that the entire assessment is\nvitiated due to mechanical and non-judicious approval under Section\n148B, and the same deserves to be quashed as being bad in law.\n9. Further, reliance was placed on the following cases and copies\nhave been enclosed in the judgment set before us as under:\nα)\nACIT vs. Serajuddin and Co. [2024] 163 taxmann.com 118\n(SC)[28-11-2023]\nb)\nACIT vs. Serajuddin & Co. [2023] 150 taxmann.com 146 (Orissa)\n[15-03-2023]\n8\nc)\nPrincipal Commissioner of Income-tax vs. Shiv Kumar Nayyar\n[2024] 163 taxmann.com

page 48 & 49 of\nthe order)\n10. It was further argued that the judgment of Hon'ble Orrisa High\nCourt in the case of Serajuddin vs. CIT as cited above has been\napproved by the Hon'ble Apex Court, where in the SLP of the\ndepartment have been dismissed as per the decision reported in [2024]\n163 taxmann.com 118. Our attention was also drawn to the judgment\nof the 'Orissa High Court' about the “CBDT Manual of Office Procedure\nin Feb, 2003" in exercise the power u/s 109 of the Act and para 9 of the\nChapter-Ill of Volume-Il (Tech.) of the said Manual. It was also submitted\nbefore us that the said judgment of the Orissa High Court in para 13,,\nwherein, the guidelines for granting approval have been issued by the\nCBDT for granting approval by the Jt./Addl. CIT, it has been mentioned\nthat the \"approving authority must grant hearing to the assessee and\n9\nthe AO should place draft order at-least one month barring date” and\nonly then the final order should be passed and the same finding have\nbeen recorded in the Chandigarh Bench Judgment of the ITAT in the\ncase of 'Ganesh Builders' as cited 'supra' at page 45 to page 49 of the\nsaid order. Similar reliance have been placed on the judgement of\nChandigarh Bench of the ITAT, in the case of ‘SP Singla Construction\nPvt. Ltd.' as cited 'supra' and, thus, it was vehemently stressed that the\nsaid approval being mechanical, the sanction as given by the Ld.\nAddl. CIT u/s 148B, which corresponds to the approval granted u/s\n153D, the assessment as framed by the AO deserves to be quashed.\n11. It was further argued by the Ld. Counsel by way of ground of\nappeal no. 2 that the approval as granted u/s 151 by the Ld. PCIT is\nwithout any application of mind, as there is not only material\ndiscrepancy between the amount mentioned in the reasons recorded\nfor reopening, and the amount mentioned in the 'annexure\nappended' in the approval u/s 151.Further, that the approving\nauthority did not approve the basis as per the proposal sent by the AO\nand, thus, it was stressed upon by relying on the judgment of the\nHon'ble Apex Court in the case of“Tele Performance Global Services\nPvt. Ltd." 170 taxmann.com 81,copy placed in the judgment set, at\npages 81 to 85, that, the approval as granted by the Ld. PCIT us 151, if it\nwas in variance in respect of the reasons as recorded by the AO, then,\nthe approval was held to be 'mechanical' and the notice u/s 148 was\nquashed and the assessment wassetaside.\n12. Our attention was drawn to the copy of reasons u/s 148 as\nplaced in the common paper book at page 1 to 6, wherein, the AO\nhad recorded the reasons of discrepancy in production, on account of\nexcessive electricity consumption of units, consequently out of book\nsales and less raw material found, as compared to the stock in the\n10\nbooks of accounts in the year of search and evasion of GST. Our\nattention was also drawn to the approval as granted by the Ld. PCIT as\nper page no. 7 of the common paper book and it was argued that no\napproval has been granted on account of the facts mentioned in the\nreasons as recorded by the AO for unaccounted production or outside\nbook sale and for that, it was argued by the counsel as under:\n\"Mechanical Approval: The approval granted under Section 151 of the\nIncome Tax Act by the Principal CIT (Central) is mechanical and\ndevoid of any application of mind. The approval order dated\n22.03.2022 merely states, “I am satisfied that it is a fit case for grant of\napproval," without mentioning the quantum or nature of the alleged\nincome escaping assessment. The annexure enclosed with the\nsanction is limited solely to a credit entry-specifically, a Cenvat credit\nof Rs.29,99,030—and makes no reference to the alleged unaccounted\nproduction or undisclosed sales, which purportedly form the primary\nbasis in the reasons recorded for reopening. Thus there is a variation in\nreasons recorded and approval. The significant component relating to\nundisclosed sales and alleged unaccounted production finds no\nmention in the approval, evidencing that the authority failed to\nexamine the key issue at all\nCenvat Credit Never Claimed as an expense in profit & loss account:\nThe credit of Rs.29,99,030 was never claimed by the assessee in the\nprofit and loss account and, therefore, could not have resulted in any\nescapement of income. The approving authority failed to appreciate\nthat if the Cenvat credit was not debited to the profit and loss\naccount, there could be no question of income escaping assessment.\nThat even the corresponding purchases have not been mentioned in the\nannexure enclosed with the sanction u/s 151.\nNo Independent Application of Mind: The absence of reference to\nvital facts and figures in the approval shows that the Principal CIT did\nnot apply independent judgment as required under law before\ngranting sanction under section 151.Since the approval is granted\nwithout due consideration of the reasons recorded or application of\nmind, it is invalid in the eyes of law. An assessment order passed on the\nbasis of such invalid and mechanical approval is bad in law and\ndeserves to be set aside.\nYour Honours' kind attention is respectfully drawn to Para 73 of the\njudgment of Rajeev Bansal as reported in (2023) 301 Taxman 238 (SC),\nwherein the Hon'ble Apex Court has categorically held that the\npurpose of obtaining sanction under Section 151 of the Act is to\nsafeguard the assessee from mechanical reopening of assessments,\nand to ensure that the higher authority applies its mind to the reasons\nrecorded by the Assessing Officer before granting approval. The\nHon'ble Supreme Court in the above judgment has relied upon the\ndecision in Shri Krishna (P) Ltd. v. ITO [1996] 221 ITR 53 (SC), wherein it\n11\nwas held that grant of approval must not be a mere formality, but a\njudicial function to be exercised with due care, application of mind,\nand examination of relevant material. This legal position has been\nconsistently upheld by various High Courts and reaffirmed by the\nHon'ble Supreme Court in multiple cases, reinforcing that mechanical\nor cryptic approvals, without proper consideration of facts or reasons\nrecorded, vitiate the proceedings and render the consequential\nassessment orders invalid in law, whether there is factual error in the\namount of alleged ascapement.\nIn this regard reliance is being placed on following case laws-\na)\nAssistant Commissioner of Income-tax vs. Teleperformance\nGlobal Service (P.) Ltd. [2025] 170 taxmann.com 832 (SC)[10-01-2025]\nb)\nVodafone India Ltd. vs. Deputy Commissioner of Income-tax\n[2024] 161 taxmann.com 609 (Bombay)/[2024] 464 ITR 385\n(Bombay)[19-03-2024],\nc)\nSamiksha Gour vs. Income-tax Officer [2024] 162 taxmann.com\n903 (Bombay)[22-04-2024]\nd)\nS. V. JADHAV vs. INCOME TAX OFFICER & ORS. HIGH COURT OF\nBOMBAY Source (2024) 8 NYPCTR 562 (Bom)\ne)\nMohd. Shafiq Cement Store vs. Income-tax Officer [2024] 168\ntaxmann.com 72 (Amritsar - Trib.)/[2025] 210 ITD 1 (Amritsar - Trib.) [18-\n10-2024]\nf)\nFloyd Filandro Linhares vs. Income-tax Officer [2024] 166\ntaxmann.com 125 (Bombay)/[2025] 473 ITR 587 (Bombay) [07-08-2024]\ng)\nSBC Minerals (P.) Ltd. vs. Assistant Commissioner of Income-tax\n[2024] 167 taxmann.com 113 (Delhi)[20-08-2024]\nh)\nCENTRAL INDIA ELECTRIC SUPPLY CO. LTD. vs. INCOME TAX\nOFFICER & ANR. 333 ITR 237,\ni)\nWSFX Global Pay Ltd Vs ACIT Bombay High Court (2023) 7\nNYPCTR 1771 (Bom)\n13.\nIt was, thus, stressed upon by the Counsel that the approval has\nbeen granted u/s 151 by the Ld. PCIT in a mechanical manner, and\nparticularly, referred to the judgment of Hon'ble Bombay High Court, in\nthe case of Vodafone India Limited reported in 161 taxman 609in\nwhich, the notice u/s 148 was quashed for the reason, in as much as, in\nthe notice stating escaping of income was mentioned as 42858.47\ncrore, whereas, in the order u/s 148A(d), it was mentioned as 12431.99\ncrore and, there was no explanation about such variance. It was\nfurther argued that since, only mechanical approval has been granted\n12\nby the Ld. PCIT u/s 151 in a casual manner. It is always expected from\nthe senior officer to verify the facts before granting the approval Our\nattention was further drawn to the Annexure attached with the\napproval at page 9 to 10 of the ‘Common Paper' wherein only\napproval granted to the Assessing Officer is of ‘Cenvat Credit' by the\nPCIT. Thus, in the present case, since the approval as granted u/s 151 is\nin variance with the reasons as recorded by the AO, therefore, it was\nstressed before us that the notice u/s 148 deserved to be quashed. It\nwas also pointed out that since no approval has been granted for\nalleged unaccounted production as per stocks, the assessment as\nframed by AO be quashed.\n14. Along with the above, the Ld. Counsel referred to Ground No. 4\nwherein the arbitrary estimation of excess production of 379 metric tons\non alleged unaccounted sale of Rs.1,13,70,000/- was done based\nsolely on the assumed power consumption of 737.50 units/metric tons\nby the CIT(A).It was argued that during the course of search no\nmaterial with regard to the unaccounted purchases or sales or any\nproduction outside the books have been found and nothing have\nbeen mentioned in the order of the AO/CIT(A).The whole basis have\nbeen drawn by the AO on the basis of presumptions and estimation of\nproduction on the consumption of electricity units and, thus, it was\nstressed, that without their being any incriminating material found\nduring the course of search, which is a basic condition for escapement\nof income u/s 147, the issuance of notice u/s 148 for the last three years\ncannot be the automatic. Thus, both the AO and the Ld. PCIT have\nresorted to the reopening of the case u/s 148 and further, PCIT has\ngiven the approval, on the basis, that, since the search have been\nconducted on the assessee on 08.09.2021, the reopening for the past\nthree years is automatic. The Ld. Counsel of the assessee referred to the\n13\nprovisions of the Finance Act, 2021 and Explanation 2 to Section 148 as\nintroduced by Finance Act, 2021 and submitted as under:\ni.\nSubmissions to Additional Ground No.4:\n1)\nIt is a matter of record that in cases where a search was\nconducted up to 31st March 2021, the applicable scheme under the\nIncome Tax Act, as it then stood, provided for automatic initiation of\nassessment proceedings under Section 153A for six assessment years\npreceding the year of search. Similarly, reopening of assessments\nunder Section 153C was also automatic in respect of “other persons" based on seized material. However, the legal position has now been\nsettled by the Hon'ble Supreme Court in the landmark judgment of\nPrincipal CIT v. Abhisar Buildwell Pvt. Ltd., reported in 150\nTaxmann.com 257, wherein it was categorically held that:-\n\"In respect of completed or non-pending assessment years as on the\ndate of search, no addition can be made under Section 153A in the\nabsence of any incriminating material found during the course of\nsearch relatable to the assessee and the assessment year in question.\"\n2)\nWhere an assessment has been completed under section\n143(1) or 143(3), and no incriminating material was found during the\nsearch pertaining to the searched person for the relevant assessment\nyear, and the time period for issuance of notice under section 143(2)\nhas expired, any addition made in such completed assessments is\nbeyond jurisdiction and liable to be quashed.\n3) Statutory Scheme Post-Finance Act, 2021:-\na)\nThe Finance Act, 2021 has overhauled the reassessment regime\nunder sections 147 and 148 of the Income Tax Act. Pursuant to the\namendments, even search cases are now governed by the provisions\nof section 147, with requisite safeguards introduced under section 148,\nproviso to section 148 and explanation 2 to section 148.\nb)\nTwin Conditions under Section 148: Before issuance of a notice\nunder section 148, the following two mandatory preconditions must be\nsatisfied:-\n•\nExistence of Information suggesting that income chargeable to\ntax has escaped assessment for the relevant year.\nPrior approval of the specified authority for issuance of the\n•\nnotice.\nc)\nExplanation 2 to Section 148:- (As introduced by Finance Act\n2021)\nExplanation 2(i) to Section 148 deems that in cases involving a search\ninitiated under section 132, the Assessing Officer (AO) shall be deemed\nto have information suggesting escapement of income. However, this\n14\ndeeming fiction only facilitates initiation of proceedings, not the\nmaking of addition per se.\nd)\nRequirement of Incriminating Material:-\nDespite the deeming provision in Explanation 2, to 148 that no\naddition can be made in the absence of incriminating material found\nduring the search, particularly for completed assessments as by\ncombined reading of section 147 read with first proviso to section 148.\nIn the present case, the assessee is a searched person. However, no\nincriminating material was found during the search relevant to the\n assessment year under consideration. Therefore, although the\ndeeming fiction under Explanation 2 may justify issuance of the notice\nunder section 148, the absence of incriminating material makes any\naddition unsustainable.\ne)\nIt is respectfully submitted that under the amended scheme of\nreassessment as introduced by the Finance Act, 2021, particularly in\nthe context of search cases covered under Section 147/148, two\nstatutory conditions must be satisfied before issuing a notice under\nSection 148. Firstly, there must exist \"information which suggests that\nincome chargeable to tax has escaped assessment\" for the relevant\n assessment year. Secondly, such issuance must be preceded by the\nprior approval of the specified authority. In this regard, Explanation 2 to\nSection 148 provides a deeming fiction wherein the conduct of a\nsearch is treated as \"information\" suggesting escapement of income.\nHowever, this deeming fiction has been inserted by way of an\nExplanation 2 and not through a Proviso. It is a settled principle of\nstatutory interpretation that while a Proviso operates as an exception\nor condition altering the main provision, an Explanation only clarifies\nand cannot override or expand the primary statutory requirement.\nTherefore, the Explanation deeming a search as information must be\nread in conjunction with the main provision and the first proviso, which\nmandates that the information must relate to the specific assessment\nyear in question. In the assessee's case, no incriminating material\npertaining to the relevant assessment year was found during the\ncourse of search. Hence, the reliance solely on Explanation 2, without\ndemonstrating that the information pertains to escapement of income\nfor the relevant year, is misplaced and renders the initiation of\nproceedings under Section 148 legally unsustainable. The relevant first\nproviso to section 148 and explanation 2 to section 148 is reproduced\nas under:-\n1st Proviso to section 148 as amended by Finance Act 2021:-\nProvided that no notice under this section shall be issued unless there is\ninformation with the Assessing Officer which suggests that the income\nchargeable to tax has escaped assessment in the case of the assessee\nfor the relevant assessment year and the Assessing Officer has\nobtained prior approval of the specified authority to issue such notice.\nExplanation 2.-For the purposes of this section, where,-\n15\n(i) a search is initiated under section 132 or books of account, other\ndocuments or any assets are requisitioned under section 132A, on or\nafter the 1st day of April, 2021, in the case of the assessee; or\n(ii)\n(iii)\n(iv).\nthe Assessing Officer shall be deemed to have information which\nsuggests that the income chargeable to tax has escaped assessment\nin the case of the assessee for the three assessment years immediately\npreceding the assessment year relevant to the previous year in which\nthe search is initiated or books of account, other documents or any\nassets are requisitioned or survey is conducted in the case of the\nassessee or money, bullion, jewellery or other valuable article or thing\nor books of account or documents are seized or requisitioned in case\nof any other person.\n(Emphasis Supplied)\ne)\nFrom the above legal position, it is respectfully submitted that a\nnotice under Section 148 cannot be issued automatically to a\nsearched person, unlike the earlier regime applicable to searches\nconducted prior to 1st April 2021.Under the revised framework, the\nAssessing Officer is now mandatorily required to apply his independent\nmind while seeking approval under Section 151 from the specified\nauthority. Such approval must be based on the satisfaction that the\ninformation discovered during the course of search pertains to and\nsuggests escapement of income for the relevant assessment year for\nwhich the notice under Section 148 is sought to be issued.\nThe deeming fiction created by Explanation 2 to Section 148—treating\na search as information suggesting escapement of income—must be\ninterpreted harmoniously with the first proviso to Section 148, which\nrequires that such information be specific to the assessment year in\nquestion. This condition can only be fulfilled if the Assessing Officer has\nduly examined the seized materials, records, documents, and any\nassets in writing, and formed a reasoned belief that such material is\nrelevant to the year for which notice is being proposed. Therefore,\ndespite the deeming fiction applicable to searched persons, the\nissuance of notice under Section 148 still requires the Assessing Officer\nto demonstrate that the information unearthed during search leads to\nescapement of income in the specific assessment year. The mere fact\nof search, in itself, is not sufficient reason to issue a notice. Failure to\nestablish this connection would render the issuance of notice without\nproper approval under Section 151 as bad in law and unsustainable.\nf)\nThe interpretation outlined above is further supported by the\nlegislative change brought about by the Finance Act, 2021, wherein\nthe phrase \"reasons to believe” which previously formed the\njurisdictional foundation for reopening under Section 147 — has been\nconsciously omitted. The substituted scheme clearly reflects a shift in\nlegislative intent, whereby the jurisdiction to initiate reassessment\nproceedings now arises only when there is income that has actually\nescaped assessment, as evidenced by information as defined under\n16\nthe Explanation to Section 148. This structural change reinforces the\nprinciple that the mere occurrence of a search or survey, without a\ndirect nexus to escapement of income for a particular assessment\nyear, does not confer jurisdiction upon the Assessing Officer. It is\ntherefore imperative that the information relied upon must suggest\nescapement of income specific to the assessment year in question,\nand must be substantiated through a reasoned and independent\napplication of mind before issuance of notice under Section 148.\nFinance Act 2021\nUp to Finance Act 2020\n\"147. If any income\nchargeable to tax, in the\ncase of an assessee, has\nescaped assessment for\nany assessment year, the\nAssessing Officer may,\nsubject to the provisions\nof sections 148 to 153,\nassess or reassess such\nincome or recompute the\nloss or the depreciation\nallowance or any other\nallowance or deduction\nfor such assessment year\n(hereafter in this section\nand in sections 148 to 153\nreferred relevant\nyear).\nas the assessment\n147. If the 5 [Assessing] Officer [has\nreason to believe”] that any income\nchargeable to tax has escaped\nassessment for any assessment year,\nhe may, subject to the provisions\nof sections 148 to 153, assess or\nreassess such” income 7and also any\nother income chargeable to tax\nwhich has escaped assessment and\nwhich comes to his notice\nsubsequently in the course of the\nproceedings under this section, or\nrecompute the loss or the\ndepreciation allowance or any other\nallowance, as the case may be, for\nthe assessment year concerned\n(hereafter in this section and\nin sections 148 to 153 referred to as\nthe relevant assessment year) :\nProvided that where an assessment\nunder sub-section (3) of section 143 or\nthis section has been made for the\nrelevant assessment year, no action\nshall be taken under this section after\nthe expiry of four years from the end\nof the relevant assessment years,\nunless any income chargeable to tax\nhas escaped assessment for such\n assessment year by reason of the\nfailure on the part of the assessee to\nmake a return under section 139 or in\nresponse to a notice issued under\nsub-section (1) of section\n142 or section 148 or to disclose fully\nand truly all material facts necessary\nfor his assessment, for that assessment\nyear:\n17\ng)\nReference may kindly be drawn to the judgment of the Hon'ble\nKarnataka High Court in the case of Vasanthi Ramdas Pai reported in\n470 ITR 536, wherein it has been categorically held that a conjoint\nreading of Sections 147 and 148 makes it unequivocally clear that\nescapement of income is a sine qua non for the initiation of\nproceedings under Section 147. The Court emphasized that the\navailability of information suggesting escapement of income is a\nmandatory precondition for issuance of notice under Section 148. The\nphraseology employed in Section 148 post-amendment mandates\nthat such information must be objective in nature, and not merely\nspeculative or inferential. It must specifically indicate that income\nchargeable to tax has escaped assessment. The Hon'ble Court further\nclarified that merely invoking the deeming fiction under Explanation 3\nto Section 148, without any supporting material to correlate the\nalleged escapement to the relevant assessment year, would be\ninadequate. Explanation 2 is merely a facilitative provision, and the\nAssessing Officer is still required to independently evaluate whether the\ninformation gathered during the course of the search is sufficient to\nestablish escapement of income warranting reassessment.\nPara F Ramdas Pai reported in 470 ITR 536 (Refer page no. 150 to 151\nof case law index book) (Placed in PB pages 139 to 157)\n(a) Now, to say that the Assessing Officer can invoke Section 147\nwithout any reason would, apart from being contrary to the\naforestated rule of law, also fall foul of Article 14 as he is expected to\nact reasonably. The requirement to act reasonably being in-built into\nthe amended provision, an act in variance with the same is\nunsustainable. Therefore, I am of the considered view that the\nAssessing Officer should have information as defined in Explanation 1\nto section 148 that suggests escapement of income and only\nthereafter, the provisions of Section 148 can be invoked. Further, such\nan exercise should be reasonable and not fanciful or roving as pointed\nout in ITO vs LAKHMANIMEWAL DAS (1976) 3 SCC 757, (103 ITR\n457). Though this decision was rendered long before the amendment\nto the subject section was effected, its inner voice animates the\nDivision Bench decision of Delhi High Court in DIVYA CAPITAL ONE\nPRIVATE LIMITED vs. ACIT [2022] 445 ITR 436 (Del), (Refer page no. 158 to\n165 of case law index book) that has been rendered post-\namendment.\n(b) If one looks at the reasons given in the notices in question, as also in\nthe impugned orders that followed the said notices, it becomes\nevident that they merely mention that, information was received in line\nwith the risk management strategy. They do not disclose what kind\nand content of information it was. While the notice does not state\nanything more, the annexure to the notice talks of Section 56 and long\nterm capital gains versus short term capital gains. An Assessing Officer\nfunctioning under the statute cannot employ jugglery of words in\nnotices of the kind and let the assessee keep guessing why is his\nassessment being re-opened. The order clearly sets out that the\nAssessees have already disclosed the said transactions in the Return,\n18\nthough arguably they could have been taxed differently. It is very\nintriguing to note paragraph 3 of the impugned orders issued under\nSection 148A(d) of the Act which has the following text:\n'On going through return of income filed by the assessee for AY 2018-\n19, it is noticed that the assessee has not disclosed the above\ntransaction and the income there upon in the Return of Income for the\nrelevant AY 2018-19. As per the return of income, the assessee has\nclaimed exempt income of Rs.298,96,71,235/- as Long Term Capital\nGain from sale of shares.'\nIn the similar notice issued to another petitioner, everything is verbatim\nexcept the amounts involved. The first sentence in the said paragraph\nthat the Assessee has not disclosed the transactions in question for the\n Assessment Year 2018-19, is falsified by the second sentence which\nstates that the Assessee has claimed exempt income as long term\ncapital gain from the sale of shares, which manifests the contradiction.\nNothing more is necessary to specify as the matter is as apparent as\ncan be. Therefore, this is a clear case of issuing notices based on\ndisclosure in the existing Return of Income filed by the Assessee but on\nincorrect premise of nondisclosure. There was no new information\nwhatsoever that has come into his domain suggestive of escapement\nof income.\n(c) It is pertinent to mention that the definition of information given\nunder Explanation I to Section 148 is a 'means definition' as\ndistinguished from ‘means and includes definition'. This Explanation\nenumerates only two [upto 31.3.2022] and five [from 1.4.2022]\ncategories and the information even if it be true, unless is the one\nrelatable to any of these categories, the jurisdiction cannot be\nassumed by the Assessing Officer. It hardly needs to be stated that\nwhere the legislature employs 'means definition', it is exhaustive and\ntherefore, nothing can be added vide P.KASILINGAM vs. P.S.G.\nCOLLEGE OF TECHNOLOGY, 1995 Supp (2) SCC 348.\nh)\nFurther reliance is placed on the decision of the Hon'ble Delhi\nHigh Court in the case of Divya Capital One Pvt. Ltd. reported in 445\nITR 436, wherein the Court has categorically held that even under the\namended scheme of reassessment under Sections 147 and 148 of the\nAct, the existence of information suggesting escapement of income\ncontinues to be a foundational jurisdictional requirement. The Hon'ble\nCourt clarified that the benchmark under the amended law remains\naligned with the earlier threshold of “reason to believe,” and that the\npower under Section 147 cannot be invoked in the absence of\nspecific, credible, and relevant information that points toward\nescapement of income. The relevant portion of the judgment is\nreproduced hereunder for ready reference:\nCOURT'S REASONING\n19\nNEW RE-ASSESSMENT SCHEME WAS INTRODUCED BY THE FINANCE ACT,\n2021 WITH THE INTENT OF REDUCING LITIGATION AND TO PROMOTE\nEASE OF DOING BUSINESS.\n7. This Court is of the view that the new re-assessment scheme (vide\namended Sections 147 to 151 of the Act) was introduced by the\nFinance Act, 2021 with the intent of reducing litigation and to promote\nease of doing business. In fact, the legislature brought in safeguards in\nthe amended re-assessment scheme in accordance with the\njudgment of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO,\n(2003) 259 ITR 19 (SC) before any exercise of jurisdiction to initiate re-\nassessment proceedings under Section 148 of the Act.\n8. This Court is further of the view that under the amended provisions,\nthe term \"information” in Explanation 1 to Section 148 cannot be lightly\nresorted to so as to re-open assessment. This information cannot be a\nground to give unbridled powers to the Revenue. Whether it is\n"information to suggest" under amended law or “reason to believe" under erstwhile law the benchmark of “escapement of income\nchargeable to tax” still remains the primary condition to be satisfied\nbefore invoking powers under Section 147 of the Act. Merely because\nthe Revenue-respondent classifies a fact already on record as\n"information” may vest it with the power to issue a notice of re-\nassessment under Section 148A(b) but would certainly not vest it with\nthe power to issue a re-assessment notice under Section 148 post an\norder under Section 148A(d).\ni)\nSimilarly, in the case of Angelantoni Test Technologies SRL reported\nin 463 ITR 139 (Refer page no. 166 to 170 of case law index book), the\nHon'ble Delhi High Court reiterated that under the amended\nreassessment regime, the existence of “information which suggests\nthat income chargeable to tax has escaped assessment” remains the\nsine qua non for invoking jurisdiction under Section 147 of the Act. The\nCourt emphasized that the threshold requirement of escapement of\nincome has not been diluted by the amendment, and that such\ninformation must be objective, specific, and relevant to the assessee\nand the assessment year in question. The following observation of the\nCourt is noteworthy:\n9. Further, this Court in Divya Capital One Private Limited (Earlier Known\nas Divya Portfolio Private Limited) vs. Assistant Commissioner of Income\nTax Circle 7(1) Delhi & Anr., 2022 SCC OnLine Del 1461 held that\n'Whether it is “information to suggest" under amended law or “reason\nto believe” under erstwhile law the benchmark of “escapement of\nincome chargeable of tax” still remains the primary condition to be\nsatisfied before invoking powers under Section 147 of the Act'.\n10. Consequently, the impugned orders under Section 148A (d) of the\nAct and the notices passed under Section 148 of the Act and all\nconsequential action taken thereto are set aside. It is clarified that if\nany material becomes subsequently available with the Revenue, it\nshall be open to it to take proceedings in accordance with law. The\nchallenge to the vires to Explanation 1 to Section 148 of the Act is left\n20\nopen. With the aforesaid directions, the present batch of writ petitions\nis disposed of.\nj)\nFrom the above legal framework and factual matrix, it is evident\nthat Explanation 2 to Section 148 merely provides a deeming fiction to\nthe effect that the Assessing Officer (“AO”) shall be deemed to have\ninformation suggesting that income chargeable to tax has escaped\nassessment in the case of a search. However, this deeming fiction\nalone does not suffice for issuance of a notice under Section 148. The\nAO is still required to pass the substantive test under Section 147, i.e.,\nhe must independently establish that income chargeable to tax has\nactually escaped assessment for the relevant assessment year. This is\nreinforced by the first proviso to Section 148, which lays down a\nnegative condition, stating that no notice under Section 148 shall be\nissued unless there is information suggesting escapement of income.\nImportantly, Section 147 is not merely an enabling provision for issuing\na notice under Section 148 based solely on deemed information.\nRather, the precondition of escapement of income under Section 147\nmust be judicially satisfied, and the information under Explanation 2\ncan only assist, but not replace, this statutory requirement.\n15. It was argued that the latest judgment by the Hon'ble ‘Karnataka\nHigh Court' in the case of Vasanthi Ramdas Rai as cited above for\nwhich, a copy has been placed in the judgment set, wherein, it has\nbeen held that escapement of income is a prerequisite for issuance of\nnotice u/s 148 and without their being any escapement of income, or\nany incriminating material relating to such escapement having been\nfound, there cannot be any escapement of income automatically, as\nthere has to be some material on record for such reopening u/s 148. It\nwas further argued by the Ld. Counsel by drawing our attention to\nproviso to the Section 148 which read as under:\n\"Provided that no notice under this section shall be issued unless there\nis information with the Assessing Officer which suggests that the\nincome chargeable to tax has escaped assessment in the case of the\nassessee for the relevant assessment year and the Assessing Officer\nhas obtained prior approval of the specified authority to issue such\nnotice.\"\n16.\nof the assessment year, the escapement has to be proved, because in\nthe proviso, the word is “Relevant Assessment Year" and, further, by\nreferring to Section 147, it was argued before us that in place of the\nFurther, it was stressed before us by the Ld. Counsel that for each\n21\nword \"Reason to Believe”, it has been brought by way of Finance Act,\n2021, \"that there is an escaped income for the relevant assessment”\nyear and, thus, there cannot be any automatic reopening of the three\n assessment years immediately preceding the AY relevant to previous\nyear, in which, the search has been initiated there being any material\nand thus, in nutshell, there being no evidence of the ‘escapement of\nincome' relating to unaccounted production or of stocks, following the\njudgments of Hon'ble Karnataka High Court, Delhi High Court as cited\n'supra', the very issuance of notice u/s 148 deserves to be quashed as\nthe PCIT while granting the approval has accorded the same as it the\nmoment search has taken place, the 148 can be issued as per\napproval wherein he has mentioned as under:-\n\"The assessee is connected to a search action conducted on\n08.09.2021 u/s 132 of the Act, on Rosha and Shree Ganesh Group.\nThus, the assessee is covered under clause (a) of proviso to the section\n148A of the Act. Hence, the Assessing Officer is not required to pass an\norder /s 148A(d) before issuing notice u/s 148 of the Act.\"\n17. The Ld. Counsel referring to the Ground No. 3, which relates to the\nalleged bogus purchases of Rs.1,92,51,910/- from M/s. Neelkanth Steel\n& Allied Industries wherein, the AO has made a total addition of Rs.\n1,92,51,910/- on account of bogus purchases from the above said party\non the basis of information received from GST. It was alleged that there\nis a passing of wrong ‘Canvet credit' and, though, the Ld. Counsel of\nthe assessee during the course of assessment proceedings filed the\ncopy of account of Neelkanth Steel and Allied Industries in his books of\naccounts, where all such purchases have duly been recorded and\npayments have been made through banking channel and placed\nbefore the AO, the copy of the bank account statement of the\nassessee term where payment towards purchases have been made.\nThe copies of the invoices as raised by the Neelkanth Steel And Allied\nmentioning the vehicle numbers, evidence, from the ‘Excise and\n22\nTaxation Department of Punjab', certifying movement of goods and\nabove all, the day to day stock register have been filed, wherein, the\nsaid purchases of the scrap team above party and other have been\nrecorded and corresponding consumption have also been recorded\ntherein, which shows that the such purchases have been utilized for\nmanufacture of finished goods and no doubt has been cast on the\nsales by the AO.\n18. It was further argued before us that the books of accounts of the\nassessee have been accepted and, thus, if the books of accounts\nhave not been rejected u/s 145(3), no addition could be made in the\ncase of the assessee. The reliance was placed on the number of\njudgments, particularly of Hon'ble Punjab &Haryana High Court in the\ncase of Om Overseas reported in 315 ITR 185 for the said preposition.\nIt was further argued that even the CIT(A) has discussed this issue and\ngiven a finding at page 72 to 73 of his order and applied a gross profit\nrate of 4% on the alleged bogus purchases of Rs.1,92,51,910/-for which,\nit was argued that the same was not in order as the rates of the\npurchases from the doubtful parties were same or less than the parties,\nwhose purchases have not been doubted by the Department. Thus,\nthere was no justification for making the addition of Rs.7,70,048/- as\nsustained by the CIT(A).\n19. With regard to the part addition of Rs.1,13,70,000/- as sustained\nby the CIT(A) by taking an average power consumption for the last five\nyears at 737.50 units metric tonnes and during the year under\nconsideration, the per metric power consumption was 755 and, thus,\nthe CIT(A) calculated the excess production and by adopting rate of\nsale and assuming that the sales have been made, calculated the\naddition of Rs.1,13,70,000/- and against which, the department is in\ncross appeal. It was argued by the Ld. Counsel before us that there is\n23\nno incriminating material found during the course of search with regard\nto the production, outside the books of accounts or any purchases and\nsales outside the books of accounts. merely on the basis of the alleged\nhigher consumption of the units and on the basis of the statement of\nthe \"Chemist\" during the course of search, about the method of\ncalculating the consumption of unit also on account of the subsequent\nyears, consumption of units in AY 2021-22, which was calculated on\naverage basis at 606 units per metric tonnes, the AO went ahead with\nthe estimation of unaccounted production and sales outside the books\nof accounts without their being any incriminating evidence found\nduring the course of search. The Ld. Counsel referred to the reply filed\nduring the course of assessment proceedings at page 10 & 11 of the\norder of CIT(A) that there were difference of qualities of scrap and\nthere was no fast & hard rule for the consumption of electricity units\nconsidering the fact that at times, there was a breakdown or switching\noff of electricity, due to which, it takes more time in heating of the\nmaterial and that merely on the basis of the consumption of electricity\non an average basis for AY 2021-22, no adverse view could be taken\nagainst the assessee.\n20. It was further argued by the Ld. Counsel that even the basis\nadopted by the Ld. CIT(A) by taking into consideration the average\nconsumption of units per metric ton comes to 737.5 unit per metric\ntonnes and thus, the part addition as sustained by the Ld. CIT(A) is\nagainst the facts & circumstances of the case, since no evidence of\nany unaccounted production have been found during the course of\nsearch. It was further argued as under:\n20.\nThe entire process of manufacturing of the Assessee was duly\nexplained to the AO. It was duly explained that the consumption of\nelectricity would depend upon several factors. The consumption of\nelectricity would rather change in every round of manufacturing\nprocess.\n24\n21. The furnace is charged with all combinations of scraps such as\npig iron, heavy melting scrap, shredded scrap or sheet metal. When\nthe machine is loaded with different types of scraps, the power\nconsumption would naturally differ each time.\n22.\nEven as per studies, electric furnaces are considered as being\none of the worst source of fluctuations on a power supply system.\n23.\nEven high quality and low quality of aluminium scrap is mixed\nwith the scrap in the plant in order to get the final product as per the\nrequirement of the buyer and as per order. The said combination also\nrequires different power consumption.\n24.\nIt is also a matter of fact that, when ever there is power failure,\na time of around 1-2 hours is again required for the furnace to again\nreach the same level. So naturally the power consumption would be\nmore in such a case.\n25. The seized annexure-6 (page-214-244 of PB), which is actually\nthe power consumption reading of the furnace for every heat for a\nparticular period also proves the vast variations in the consumption of\nelectricity. For example- power consumption is 575 units also for a\nparticular heat on 03.09.2021 (page-232 of PB) and it is 848 units also\nfor a particular heat on 30.08.2021 (page-223 of PB).\n26.\nThe Copy of monthwise details of Power consumption for the\nyears FY 2015-16 to FY 21-22 is also enclosed in the PB at pages-254-\n260. In the said consumption details also there is huge variation. Further\nthe fact that the unit of the Assessee being an excisable unit also puts\nweight on the stand of the Assessee.\n27.\nEven for the AY 2017-18, the case of the Assessee was finalised\nunder scrutiny vide order dated 17.06.2019 and no adverse inference\nhas been drawn on the Power Consumption issue. It is also worth to\nmention here that the average yearly consumption for the said year\nwas 845 units.\n28.\nFurther, the department itself has accepted that there are wide\nfluctuations in power and had issued a internal circular dated\n25.05.2016, wherein it was stated that 15% variation are possible and\npermissible in consumption of electricity per metric tonne production.\n21. Reliance was also placed on the judgment of Hon'ble “Apex\nCourt" dated 31.01.2011 in the case of Commissioner of Central Excise,\nMeerut vs. RA Casting Pvt. Ltd. wherein, the Hon'ble Apex Court have\nheld that there cannot be any universal/ uniformly acceptable\nstandard of electricity consumption for calculating the excise duty\nliability, that too on the basis of imaginary production assumed by the\nrevenue with no other supporting record, evidence or document to\njustify the allegation. Similar reliance have been placed on the number\n25\nof other judgments of Jurisdictional Bench of Chandigarh ITAT in the\nfollowing cases:\na)\nHon'ble Supreme Court of India dated 31/1/2011 in the case\nof Commissioner of Central Excise, Meerut Vs. R.A Casting (P)\nLtd. wherein the Hon'ble Apex Court has upheld the order of Custom,\nExcise and Service Tax Appellate Tribunal and held that the findings of\nthe Tribunal were based on material on record. The Hon'ble Apex\nCourt recorded as under:-\n\"Being aggrieved by the impugned orders, the respondents filed\nappeals before the customs, Excise & Service Tax Appellate Tribunal,\nNew Delhi. The Tribunal by the impugned orders allowed the appeals,\nThe Tribunal observed that it is settled principle of law that the\nelectricity consumption can not be the only factor or basis for\ndetermining the duty liability, that too on imaginary basis, especially\nwhen Rules 173E mandatory requires the Commissioner to prescribe/fix\nnorm for electricity consumption first and notify the same to the\nmanufactures and thereafter ascertain the reasons for deviations, if\nany, taking also into account the consumption of various inputs,\nrequirements of labour, material, power supply and the conditions for\nrunning the plant together with the attendant facts and\ncircumstances. The Tribunal further observed that no experiments have\nbeen conducted in the factories of the appellants for devising the\nconsumption norms of electricity norms of electricity for producing one\nMT of steel ingots. Tribunal also observed that the electricity\nconsumption varies from one units to another and from one date to\nanother and even from one heat to another within the same date.\nTherefore, no universal and uniformly acceptable standard of\nelectricity consumption can be adopted for determining the excise\nduty liability that too on the basis of imaginary production assumed by\nthe ' Revenue with no other supporting record, evidence or document\nto justify its allegations. The Tribunal has also considered the report of\nDr. Batra, which has been relied upon for making the allegations that\nthere was higher electricity consumption. It appears that Dr. Batra in\nhis report has observed that for the production of 1 MT of steel ingots,\n1046 units electricity required.\"\nb)\nVishal Paper Industries vs JCIT in order\ndated 23.03.2012\n\"15. In the present case, the Id. CIT(A) presumed that consumption of\nhigher electricity would directly and invariably lead to the higher\nproduction, not accounted for by the assessee in his books of\naccount. There is fundamental fallacy in the conclusions and findings\nof the Id. CIT(A) in attributing unaccounted production, to such sole\nfactor. The Id. CIT(A), failed to bring on record, to demonstrate that\nthe assessee indulged in the purchases of raw material outside the\nbooks of account and sales of the manufactured goods outside the\nbooks of account allegedly produced by way of higher consumption\nof electricity. In the real manufacturing world, there is hardly any direct\nand uniform correlation with consumption of electricity and\nproduction of manufactured goods. Having regard to the above legal\n26\nand factual discussions, we do not find any substance and merit, in the\nfindings of the Id. CIT(A). Therefore, such findings cannot be sustained.\nConsequently, this ground of appeal