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Facts
The Revenue is aggrieved by the CIT(A)'s order, which set aside the assessment order. The AO had reopened the case u/s 147 based on information from DGCEI regarding alleged clandestine removal of goods. The assessee initially declared Nil income with losses.
Held
The Tribunal held that since the CESTAT had already set aside the findings and conclusions of the Excise Authorities regarding clandestine removal, the AO's action of reopening the assessment based on these set-aside findings was invalid. The CIT(A) was justified in quashing the AO's action.
Key Issues
Whether reopening of assessment u/s 147 is valid when the basis of reopening (information from excise authorities) has been quashed by CESTAT.
Sections Cited
143(3), 147, 148, 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 17.10.2024 passed by learned Commissioner of Income-Tax (Appeals), NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 19.12.2017 passed by learned ACIT-1(1), Indore [“AO”] u/s 143(3) r.w.s. 147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2011-12, the revenue has filed this appeal on following grounds:
“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in stating that the information on which the case was reopened and Page 1 of 9
M/s Anant Steels Private Limited AY 2011-12 assessment finalized turned out to be deficient while the then AO has reopened the case of the assessee company after due verification of the information available on record and duly recording his satisfaction for reopening of the case.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in placing whole reliance on the judgment of CESTAT Bench while the then AO has received credible information from DGCEI on the basis of documents/information/evidences seized during the course of search and seizure action of DGCEL.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in not considering the fact that during the assessment proceedings the assessee-company itself admitted that the incriminating documents were found and seized from its premise during the course of search action of DGCE.”
The background facts leading to present appeal are such that the assessee is a private limited company. For AY 2011-12, the assessee filed its return of income u/s 139 on 29.09.2011 declaring a total income of Rs. Nil with carry forward of loss of Rs. 1,94,97,169/- which was assessed.
Subsequently, the AO re-opened assessee’s case u/s 147 through notice dated 17.03.2017 u/s 148. Finally, the AO completed re-opened assessment after making an addition of Rs. 76,30,931/- on account of estimated gross- profit @ 5% from unaccounted sales/turnover/clandestine removal of goods of Rs. 15,26,18,611/-. Aggrieved, the assessee carried matter in first-appeal and succeeded. Now, the revenue is aggrieved by order of first-appeal passed by CIT(A).
Initially, Ld. AR for assessee/respondent raised a preliminary objection that the present appeal filed by revenue/appellant involves a tax effect of Rs. 23,57,958/- only as mentioned in Form No. 36, which is below the monetary limit of Rs. 60,00,000/- prescribed by CBDT Circular No.
Page 2 of 9 revenue is not maintainable and must be dismissed. Replying to this, Ld.
DR for revenue/appellant filed AO’s report dated 19.05.2025. Ld. DR referred Para No. 3 of report in which the AO has submitted that the present case falls under exception category “c” of the conditions mentioned in CBDT Circular No. 5/2024 dated 15.03.2024, therefore the revenue’s appeal is very much maintainable. Ld. AR instantly agreed and dropped his objection.
Accordingly, this appeal is treated as maintainable and hearing on merit is proceeded.
We have thereafter heard the learned Representatives of both sides and carefully perused the documents held on record including the orders of lower-authorities.
In this case, the AO has taken action u/s 147 against assessee by recording reasons u/s 148 and the assessee has challenged such action of AO as illegal. The CIT(A) has passed impugned order accepting assessee’s claim and now the revenue is against CIT(A)’s order.
To start with, we refer the reasons recorded by AO for taking action against assessee u/s 147 reading as under (Page 60 of Paper-Book):
“M/s Anant Steel P. Ltd. AY 2011-12 Reasons for reopening u/s 148
M/s Anant Steels Private Limited AY 2011-12 The assessee had filed return of income on 29.09.2011 declaring total income at Rs. Nil and current year loss of Rs.1,94,97,169/-. The case was processed u/s 143(1) of the I.T. Act. The assessee is engaged in the business of manufacturing of ingot, runner riser, miss roll and steel bar and trading of MS scrap & ingot. The information with respect to tax evasion has been received from DGCEI (Director General of Central Excise Investigation) which pertains to AY 2010-11, 2011-12 and 2012-13. The DGCEI (Director General of Central Excise Investigation) conducted search on assessee on 05.01.2012 at office premises, factory, residential premises of key persons and seized various documents, Books of accounts and other incrementing documents. The commissioner of Central Excise, Indore, after the scrutinizing the Books of account, Loose papers and other seized incriminating documents has issued Show Cause Letter vide File No. V(72) 15-04/2014/ADJ-1/14148-14161 dated 04.08.2014. In the show cause the Commissioner of Central Excise has deliberated that the assessee has cleared clandestinely the TMT Bar for the volume of 32976.375 MT valued at Rs. 94,79,17,806/- against parallel/duplicate invoices as detail in the Annexure-A to his SCN. Such clandestine removal pertains to AY 2010-11 to 2012-13. The assessable value of such unaccounted sales/turnover/clandestine removal for assessment year 2011-12 comes Rs. 15,26,18,611/- On perusal of aforesaid show cause containing important/incriminating documents, it has been found that the assessee was doing parallel unaccounted business having substantial unaccounted turnover. It is worthwhile mentioning that during the course of assessment proceedings of AY 2012-13, the Assessing Officer had required the assessee to explain the common issues involved in the show cause of commissioner of custom central excise and service tax (pertaining to AY 2010-11 to 2012-13) such as issue of unaccounted sales, URD purchases, cash payment against purchase of scrap, unaccounted transactions of Rs.1,27,86,884/- as per document no. 29 of show cause of Excise Department, unaccounted payment of Rs. 24,00,000/- as per page no. 39 of show cause issued by excise department, cash payment of Rs. 15,00,000/- dally as per the statement of accountant Shri Gajanand Khadke, statement of Shri Mayank Bansal director of company wherein be admitted to have URD purchased scrap of 200-300 metric ton daily etc. However, Smt. Neera Bansal, Director and key person of the assessee could not offer any explain with justification and evidences. Considering all the facts and circumstances of the case as discussed above, I have reason to believe that the Income amounting to Rs. 15,26,18,611/- has been escaped from assessment for the A.Y. 2011-12 within the meaning of section 147 of the IT Act, therefore notice u/s 148 is being issued. The case is reopened to assess the above-mentioned income and any other income chargeable to tax which has escaped assessment and which comes to my notice subsequently during the course of proceedings under this section.”
Page 4 of 9 consideration u/s 147 on the basis of a search conducted by DGCEI (Director General of Central Excise Investigation) on 05.01.2012 wherein it was concluded by Excise Authorities that the assessee had cleared clandestinely goods worth Rs. 94,79,17,806/- in three years pertaining to AYs 2010-11 to 2012-13 (the year-wise break-up being Rs. 2,11,34,345/-, Rs. 15,26,18,611/- and Rs. 77,41,64,850/- for AYs 2010-11, 2011-12 and 2012-13 respectively as noted by AO on Page 31 of assessment-order).
However, the matter under Central Excise law had travelled to Hon’ble Customs, Excise & Service-tax Appellate Tribunal (CESTAT), Principal Bench, Delhi in Ex. A. No. 52974, 53022, 53025, 53056, 53058 & 53103 of 2016 and the CESTAT has passed order dated 27.09.2018 setting aside the observations/conclusions made by Excise Authorities and the Order-in- Original dated 26.08.2016 passed by those authorities. The relevant paras of order of CESTAT are re-produced below:
“24. In the present case, no evidence establishing, the above factors have been brought on record by the department. There is no evidence regarding the capacity of ASPL to manufacture the quantities as alleged. Further, no inquiries have been conducted from raw material suppliers, transporter or the buyers to establish clandestine manufacture and sale by ASPL. Even though the allegation is that ASPL had, in such manner, sold TMT bars worth Rs. 94,79,17,806/, по unaccounted money was recovered during the course of search from any of the premises. It has been consistent view of the Tribunal that allegation of clandestine removal cannot sustain merely on the basis of uncorroborated entries in the private record as held in Kashmir Vanaspati (P) Ltd. v CCE-1989 (39) ELT 655 (T), Raza Textiles Ltd. v CCE-1989 (44) ELT 233 (T), Hindustan Lever Ltd. CCE, Raipur-1996 (87) ELT 385 (1), Krishna & Co. v CCE, Jaipur-1998 (97) ELT 74 (T), Kothari Pouches Ltd. & Anr v CCE, New Delhi - 2000 (41) RLT 209 (T), Hindustan Coca Cola Beverages Pvt. Ltd. v CCE, Thane 2006 (205) ELT 700 (1), Rina Dyeing & Printing Works v CCE, Surat
M/s Anant Steels Private Limited AY 2011-12 2007 (209) ELT 190 (1) and Kuber Tobacco Products Ltd. v CCE, Delhi -2013 (290) ELT 137 (T)).
In view of abovementioned facts and settled position of law, we hold that the allegation of clandestine manufacture and removal of TMT bars, made in the SCN, on ASPL is merely on assumption and presumption without any material evidence corroborating the said allegation. The demand of duty on ASPL, therefore, is not sustainable. As demand of duty itself is not sustainable, no interest or penalty could be imposed on ASPL as well as on other appellants on whom penalties were imposed under Rule 26 of the Central Excise Rules, 2002 and for this reason we are not dealing with their appeals separately.
We, therefore, set aside the impugned Order-in-Original dated 26.08.2016 passed by the Commissioner and alloy all the appeals filed by appellants, with consequential relief.”
During first-appeal, the Ld. CIT(A) has taken a view that when the CESTAT has arrived at a detailed finding that the allegation of clandestine removal of goods was on assumption and presumption without any corroborating evidence, the re-opening made by AO based on the allegation/observation/conclusion of clandestine removal made by Excise Authorities, is not sustainable. On this basis, the CIT(A) has set aside the notice issued by AO u/s 148 and the assessment-order passed by AO. The relevant para of CIT(A)’s order is re-produced below for an immediate reference:
“5. The assessing officer while issuing notice u/s 148 and finalizing the assessment, placed heavy reliance on the findings of Central Excise Department. After detailed discussion in the assessment, the AO adopted the same unaccounted turnover as alleged by DGCEI and estimated 5% GP on the same. However, the CESTAT Bench has arrived at a detailed factual finding that the allegation of clandestine manufacture and removal of TMT bars by the appellant was merely on assumption and presumption without any material evidence corroborating the said allegation. It is clear that the information on which the case was reopened and assessment finalized turned out to be deficient. The effect of re-opening the assessment based on wrong facts or conclusions has been considered in the case of Tata Sons Limited (Writ Petition No. 2545/2010 decided on 3/2/2022) by Bombay
M/s Anant Steels Private Limited AY 2011-12 High Court. It has been held that if the reasons for re-opening the assessment are based on incorrect facts or conclusions, the notice issued for re-opening cannot be sustained. Notice under Section 148 of the Act of 1961 could be issued when there were reasons to believe that certain income had escaped assessment. In this regard, it was necessary for the AO to independently apply mind and thereafter consider as to whether the information on the basis of which the re-opening was proposed constituted material to believe the same. Since re-opening of the proceedings was sought on incorrect and non-existent facts, the notice under Section 148 shall be held to be invalid. Hence, the notice issued under Section 148 of the Act of 1961 on 12.01.2017 is liable to be set aside. Consequentially, assessment order finalized by the AO based on said notice would no longer survive. As a result, the appeal is allowed.” [Emphasis supplied]
Further, Ld. AR for assessee has also drawn us to the order dated 10.03.2021 passed by ITAT, Indore bench in assessee’s own case for AY 2013-14 in ITA No. 820/Ind/2018. This case relates to a subsequent AY 2013-14 wherein the AO made extrapolation of clandestine removal on the basis of above search action taken by Excise Authorities for AY 2010-11 to 2012-13 and made addition. On appeal by assessee, the ITAT revsersed AO’s action and deleted addition holding as under:
“25.3 Our findings We observe that the Ld. A.O raised concern about the correctness of the sales turnover shown by the assessee on the basis of proceedings carried out by Excise Department in the case of assessee for Assessment Year 2010-11 to Assessment Year 2012-13 alleging that the assessee had unaccounted sales turnover of 94.79 crores. The show cause notice was issued on the basis of presumption and the same was also challenged by the assessee company before CESTAT. CESTAT vide its order dated 27.9.2018 has quashed the show cause notice as issued by the Commissioner of Central Excise & Customs. The relevant finding of Customs, Excise & Service Tax Appellate Tribunal (In short 'CESTAT) in its order dated 27.9.2018 is at page 25 placed at page 85 and 86 of the paper book and reads as follows:- "25. In view of aforementioned facts and settled position of law, we hold that the allegation of clandestine manufacture and removal of TMT bars, made in the SCN, on ASPL is merely on assumption and Page 7 of 9
M/s Anant Steels Private Limited AY 2011-12 presumption without any material evidence corroborating the said allegation. The demand of duty on ASPL, therefore, is not sustainable. As demand of duty itself is not sustainable, no interest or penalty could be imposed on ASPL as well as on other appellants on whom penalties were imposed under Rule 26 of the Central Excise Rules, 2002 and for this reason we are not dealing with their appeals separately". From the above finding of CESTAT it is clear that the assessee has been held to have made no unaccounted turnover in the assessment year 2010-11 to Assessment Year 2012-13 and assessee has been given a clean chit. Therefore, the basis of Ld. A.O of questioning the correctness of the turnover of the instant assessment year is not correct and thus liable to be dismissed as the assessee has succeeded before the CESTAT and there is no specific observation of the Ld. A.O to have noticed any incidence of unaccounted turnover during the year under appeal.”
Thus, Ld. AR for assessee, referring to above documents, made a straightforward submission that when the CESTAT has already set aside the findings/observations/conclusions made in search conducted by Excise Authorities, the AO’s action of re-opening assessment of assessee based on such set aside findings remains no longer valid. Ld. AR, therefore, submitted that the CIT(A) has passed a proper order quashing the AO’s action. He submitted that the order of CIT(A) gets further strength from ITAT’s order in AY 2013-14 wherein the ITAT has also adopted the very same reasoning that the CESTAT had already held that the assessee made no unaccounted turnover in the AY 2010-11 to 2012-13 and assessee has been given a clean chit. Therefore, Ld. AR submitted, the impugned order passed by CIT(A) is perfect and does not require any interference from us. Ld. DR for revenue could not controvert or rebut these submissions of Ld. AR while leaving the matter for the wisdom of bench. After a careful consideration, we find that the impugned order of CIT(A) is valid and there is no error, infirmity or perversity in the same. Consequently, we uphold the impugned order of Page 8 of 9 dismissed being devoid of any merit.
Resultantly, this appeal is dismissed.
Order pronounced in open court on 30/06/2025