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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRAMOD M. JAGTAP & SHRI T.R. SENTHIL KUMAR
आदेश/O R D E R PER PRAMOD M. JAGTAP, VICE-PRESIDENT
This appeal is preferred by the Revenue against the order of Ld. Commissioner of Income-tax (Appeals)-Gandhinagar, Ahmedabad [CIT(A)] dated 09/02/2018 for Assessment Year (AY) 2009-10 and the solitary issue involved therein relates to the deletion by the Ld.CIT(A) of the addition of Rs.1,45,83,848/- made by the Assessing Officer on account of sales involved in clandestine removal of finished goods.
Dy.CIT vs.Zirconia Cera Tech Glazes 2
The assessee, in the present case, is a firm which is engaged in the business of Manufacturing of Ceramic Glaze. The return of income for the year under consideration was filed by it on 24/09/2009 declaring total income of Rs.83,27,239/-. In the assessment originally completed by the Assessing Officer u/s.143(3) of the IT Act, 1961 (“the Act”) vide an order dated 14/03/2011, the total income of the assessee was determined by the Assessing Officer at Rs.84,23,788/-. Thereafter, certain information was received by the Assessing Officer from Deputy Director of Income Tax (Investigation), Unit-II, Ahmedabad vide letter dated 14/02/2013 along with show-cause notice issued by Directorate General of Central Excise Intelligence, Ahmedabad (DGCEI) to the assessee regarding the various types of modes and methods of tax evasion adopted by it which resulted into escapement of huge income for the year under consideration. On the basis of this information, the assessment in the case of the assessee for the year under consideration was reopened by the Assessing Officer u/s.147 of the Act and a show-cause notice was issued u/s.148 by him on 30/03/2015 after recording the reasons. The information received from DGCEI as discussed by the Assessing Officer in his order reads as under:
“3.1. In this case on the basis of intelligence gathered by DGCEI as well as the documentary evidences recovered from several premises during the course of investigation against Tiles manufacturers, a search operation was conducted at the premises of M/s.Zirconia on 28.08.2008. Investigation conducted by DGCEI against M/s.Zirconia, reveals that they have not declared the actual assessable value of goods manufactured and cleared from their registered factory premises. The documentary as well as oral evidences collected by DGCEI from various buyers clearly indicates that M/s.Zirconia was declaring in their central excise invoices only a part of the actual transaction value of Fruit manufactured and cleared from their factory. Differential value of Frit, over and above the value declared in the invoices, was collected by them from their buyers in cash.
Dy.CIT vs.Zirconia Cera Tech Glazes 3
3.2. The observation and finding given in SCN on the basis investigations and evidences gathered by the officials of Excise Department clearly indicates that the assessee and suppressed the sale value by way of undervaluation of invoices as well as clandestine removal of goods from their premises. The suppression was revealed on the basis of finding during the course of investigations by the DGCEI and as mentioned in detail in the SCN contained in letter F.No.DGCEI/AZU/36(4)130/2007-08/1836 to 1842 dated 19.04.2010.
3.3. The SCN issued by the DGCEI revealed that the assessee was showing sale value of Frit at Rs.10/- per kg. whereas the actual price was at Rs.20/- to 30/- per kg. The amount shown in the invoices were being collected through cheques whereas the remaining amount was being collected by cash. Further it is also found that the company was declaring less production that the actual production. The company was showing consumption of 2414.14 SCM of natural gas for manufacturing of 1 MT of frit whereas on verification based on the figures of average Gas consumption against one MT of frit manufactured during the relevant period and also in view of the statement of Sh.Pravinbhai M.Patel, Partner and Production Incharge, it was found that 400-500 SCM of natural gas was consumed for manufacturing of 1 MT of frit.
3.4. From the above, this emerges that the assessee was involved in undervaluation of sale invoices, thereby suppressing the sales and also had understated the production and it’s unaccounted sale of such clandestine production. For the year under consideration i.e. F.Y. 2008-09, the amount of under valuation and the amount of Clandestine removal goods has been worked out at Rs.9,72,25,651/- as mentio9ned in SCN issued by DGCEI.”
On the basis of above information, a show-cause notice was issued by the AO seeking explanation of the assessee in the matter. Eventhough a detailed explanation was offered by the assessee in this regard, the Assessing Officer did not find merit in the same for the reasons given in his order and rejecting the same, he made an addition of Rs.1,45,83,848/- to the total income of the assessee being profit element @ 15.18% involved in the Dy.CIT vs.Zirconia Cera Tech Glazes 4 suppressed sales of Rs.9,72,25,651/-. To arrive at this conclusion, the Assessing Officer followed the assessment made in the case of the assessee in the immediately preceding years, i.e. AYs 2007-08 & 2008-09, wherein similar addition was made on account of profit element involved in the alleged suppressed sales on the basis of information received from DGCEI. The Assessing Officer accordingly completed the assessment u/s.143(3) r.w.s.147 of the IT Act, 1961 vide order dated 21/03/2016 determining the total income of assessee at Rs.2,30,07,640/-.
Against the order passed by the Assessing Officer u/s.143(3) r.w.s. 147 of the Act, an appeal was preferred by the assessee before the Ld.CIT(A) and after considering the submissions made on behalf of the assessee as well as the material available on record before him, the Ld.CIT(A) deleted the entire addition of Rs.1,45,83,848/- on account of profit element involved in the alleged suppressed sales for the following reasons given in his impugned order:
“I find that the AO had reopened the case of appellant and made the impugned additions on account of under valuation of sales and clandestine removal of goods on the basis of SCN issued by the excise department. The said SCN was quashed by the Hon’ble CESTATE vide its order dated 12/05/2015. The excise department’s appeal before the Hon’ble Apex Court was also dismissed as withdrawn and therefore the matter has now reached finality in favour of the appellant. Based on these facts, the Hon’ble ITAT, Ahmedabad has also ruled in favour of the appellant in the identical additions made in AYs 2007-08 and 2008-09. In view of all these facts, I find that the matter is now decided by the Hon’ble ITAT in favour of the appellant since the very show cause notice which was the basis of the addition being made in the appellant’s case has been quashed by CESTAT and similar additions made in the appellant’s case have been deleted by the Hon’ble ITAT, Ahmedabad. In view of the discussion above, the addition made of Rs.1,45,83,848/- by the AO on the basis of this SCN cannot be Dy.CIT vs.Zirconia Cera Tech Glazes 5 sustained and is deleted. The addition made of Rs.1,45,83,848/- is deleted. Ground of appeal is allowed.”
Aggrieved by the order of the Ld.CIT(A), the Revenue preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the addition made by the Assessing Officer on account of profit element involved in the alleged suppressed sales in the year under consideration has been deleted by the Ld.CIT(A) vide his impugned order by relying on the decision of Co- ordinate Bench of this Tribunal in assessee’s own case for the immediately preceding years rendered vide common order dated 30/11/2017 passed in & 377/Ahd/2016 (for AYs 2007-08 & 200-09 respectively), wherein the similar addition made by the Assessing Officer and confirmed by the Ld.CIT(A) was deleted by the Tribunal for the following reasons given in paragraph Nos.11 to 15 of its order:-
“11. We find that the basis of addition is contents of show-cause notice issued by the Excise Department. An investigation was carried out by DGCEI at assessee premises on 25/08/2008, wherein it was alleged by the Excise Department that assessee has not declared actual assessable value of goods manufactured and cleared from factory. Based on above DGCEI issued show-cause notice dated 19/04/2010, Excise department concluded that assessee was engaged in under valuation of sales and clandestine removal of goods. Only on the basis of same Assessing officer reopened assessee’s income tax assessment for the years under consideration and made addition of estimated Gross Profit on under valuation sales and clandestine removal of goods. The Revenue has brought nothing on record that it has applied it’s mind over and above the contents of show-cause notice in question thus there is lack of independent application of mind on behalf of revenue in these matters.
Dy.CIT vs.Zirconia Cera Tech Glazes 6 12. Without prejudice to above, we find that in Excise proceedings, concerned authorities passed order against assessee and matter was carried up to concerned Hon’ble CESTAT. Hon’ble CESTAT vide its order dated 12/02/2015 as discussed above, has decided the issue in favour of the assessee holding that Excise Department could not estimate value of alleged suppression of sales as well as clandestine removal of goods merely on the basis of assumption and surmises. The CESTAT having considered the relevant facts of the case as well as relevant material i.e. Pen drive and statement recorded by the Excise Department has decided the matter in favour of the assessee as discussed above. In these circumstances Ld. CIT(A) was not justified in observing that relief granted by Hon’ble CESTAT was highly technical.
We also find that Excise Department carried matter before Hon’ble Apex Court wherein same was dismissed as withdrawn as mentioned above. Nothing contrary was brought to our knowledge on behalf of Revenue in this regard.
We also find that Tax Appeal being Tax Appeal No.733 and 734 of 2016 preferred by the Ld. Excise Department before Hon’ble Gujarat High Court came to be dismissed vide order dated 07/12/2016, as mentioned above. Again nothing contrary was brought to our knowledge on behalf of Revenue in this regard as well. In this background, we find that the order passed by Hon’ble CESTAT has achieved the finality against the revenue. As we have observed earlier that only Excise Department action was basis of additions before us in both the years which does not survive for the reasons discussed above, so the basis of additions made by the Revenue does not survive.
In view of the above additions made on account as alleged valuation of sales and clandestine removal of goods do not survive and same are directed to be deleted in both the assessment years. In the result both the appeals filed by the assessee are allowed.”
As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of AYs 2007-08 & 2008- 09, we respectfully follow the decision of the Co-ordinate Bench of this Tribunal rendered for AYs 2007-08 & 2008-09 and uphold the impugned
Dy.CIT vs.Zirconia Cera Tech Glazes 7 order of Ld.CIT(A) deleting the addition of Rs.1,45,83,848/- made by the Assessing Officer on account of the profit element @ 15.18% involved in the alleged suppressed sales of Rs.9,72,25,651/-.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 03rd March, 2022 at Ahmedabad.