HARISONS STEEL LIMITED,WADA THANE vs. DY CIT 12(2)(2), MUMBAI

P a g e | 3 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) the assessee and certain other concerns on 27/28.06.2013 indicating that assessee has been obtaining bogus purchase bills without actual receipt of goods from various steel manufacturers for purchase of products like S.S Pipes/sheets/plates/collis and to compensate the non-receipt of cenvatable goods the company had been procuring inferior quality S.S. scrap which was its principle raw material from the open market in cash. The assessing officer stated that said show cause notice was issued by the central excise authorities and relevant extract of the show cause notice as produced by the assessing officer at page 3 of the assessment order is reproduced as under:

Para 15.2 of the show cause notice referred in the assessment order is reproduced as under:

P a g e | 4 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) “On perusal of Annexure -A it is revealed that M/s Harisons Steel Ltd, Wada during the period from 01.05.2009 to 27 06 2013has shown to have received 38,500MT of excisable goods under the invoices of dealers which infact has actually not been received and utilized by M/s Harisons Steel Ltd, Wada and to compensate the non-receipt of corresponding goods from these dealers, M/s Harisons Steel Ltd., Wada has purchased SS scrap from open market Therefore CENVAT credit amounting to Rs.59,17,57,273/ (Rupees Fifty Nine Crores Seventeen Lakhs Fifty Seven Thousand Two Hundred Seventy Three only) wrongly availed and utilized by M/s Harisons Steel Ltd, Wada during the period from 01.05.2009 to 27.06.2013 is required to be demanded and recovered from them under the provisions of Rule 14 of the CENVAT Credit Rules 2004, read with section 11A(4)] erstwhile proviso to Section 11A(1) of the Central Excise Act, 1944.”

After referring the show cause notice the assessing officer in the assessment order stated as under: “4.4 The findings in the show cause notice and the facts of the case including the business activity indicated the following: a) The assessee did not require the material of the nature for which the bills were obtained as it required regular SS scrap for manufacturing SS Billets and ingots etc. b) The assessee had not obtained any material from the parties from whom purchases were recorded in its books. c) The assessee has created documents to justify its purchases shown in its books including by Lorry receipts and entries in Excise registers. d) The assessee had shown higher purchase rates than that actually incurred on account of which it could show purchases of the material as mentioned in the invoices and consequently could reduce its profits and in the bargain obtained CENVAT credit for goods which were actually not used and benefited from the same by way of lower cash outgo if any for payment of excise duty.”

P a g e | 5 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) relevant details indicating the name of the biller recorded in its books and the corresponding consigners. However, on the basis of show cause notice issued by the central excise authority , the assessing officer observed that assessee had inflated accommodation bills to obtain twin objects of claiming higher purchases cost and in the bargain also availed of cenvat credit. He stated that the purchases recorded in the books of the assesse were not its actual purchases and same were accommodation entries for inflating its purchases and in such bargain the assessee had obtained cenvat credit which would not have been available from the S.S. Scrap dealers. The AO further stated that assessee has shown G.P of 3.33% in his books result which by no means can be considered as a reasonable profit for the manufacturing activity of the assessee. Accordingly, the assessing officer has treated 15% of the purchases of Rs.130,44,35,730/- relevant to the cenvat credit of Rs.17,90,28,750/- (including additional import duty of Rs.389,34,875/-) added to the income of the assessee. 4. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has restricted addition to the extent of 12.5% of the purchases. The relevant operating part of the decision of CIT(A) is reproduced as under: “9.2 have perused the assessment order, grounds of appeal and submissions filed by the Appellant. I find from the assessment order that the appellant was involved in obtaining bogus purchase bills without actual receipt of goods from various steel manufacturers for purchase of products like SS pipes/sheets/coils and to compensate the no receipt of the cenvatable goods, the appellant had been procuring inferior quality SS scrap from the open market in cash through brokers/traders. The transportation of such scrap was arranged through various transporters from the scrap yards at Ahmedabad, Bhavnagar Kurla, Vasai etc. The appellant was found to be following a well planned and executed method of accounting for such bogus bills and creating supporting documents in the form of transport documents etc, so that the excise authorities could not detect the illegal method which was also intended to claim bogus cenvat credit from such bills to set off the liability of excise duty. I find that the onus is on the assessee to prove the genuineness of purchases by producing the parties from whom the purchases were purportedly made, which the assessee failed to produce before the AO. Mere

P a g e | 6 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) payment through banking channels is not sacrosanct. If the seller is found to be non-existent than purchase price can be treated as income. Strict rules of evidence do not apply to the income tax proceedings and the real test with regard to genuineness of transaction is "preponderance of probabilities" and not "beyond a reasonable doubt. It is well settled law that strict rules of evidence do not apply to Income- tax proceedings and conclusive proof is also not necessary to arrive at any conclusion or to establish a fact. The AO is entitled to arrive at a conclusion on appreciation of a number of facts, the cumulative effect whereof may be considered to judge the soundness of the conclusion. It is conceivable that a mere denial by the assessee is not sufficient to rebut the circumstantial evidence which considered along with the conduct of the assessee has led to the inescapable conclusion that the assessee had taken accommodation entries and alleged purchases were not genuine. The Hon'ble Gujarat High Court in the cases of M/s. Sanjay Oil Cake Industries Vs. CIT (10 DTR 153) and Hon'ble Ahmedabad Tribunal in the case of M/s. Vijay Proteins Ltd. Vs. ACIT (58 ITD 428) has extensively dealt with this issue and came to conclusion that disallowance of 25% of impugned purchases would suffice the matter Similarly, the Hon'ble Jaipur Tribunal in the case of Deepak Dalela Vs. ITO (50 DTR 502) had extensively dealt with this issue. However, in the Misc Application filed before it, the Hon'ble Jaipur Tribunal in the case of Shri Anuj Kr. Varshney Vs. ITO & Ors. Revenue Authorities ITA 187/JP/2012 dated 22.10.14 sustained the addition to the extent of 15% after elaborate discussion and extensive findings instead of 25%. It is a settled law that Income Tax Authorities are entitled to look into the surrounding circumstances to find out the reality of the recitals made in documents. Itis the duty of the authority to go behind the smoke-screen and discover the true state of affairs. The authority is not to be satisfied with the form but with the substance of the transactions. Though the transactions in the present case were initially settled through banking channel but these were ultimately settled in cash Merely because a paper trail had been created, that would not by itself make the transaction genuine. It was held by Hon'ble Punjab & Haryana High Court in the case of Mittal Belting and Machinery Stores Vs. CIT (253 ITR 341) that if on the examination of the evidence, it is found that there was no genuine transaction between the parties, a pure paper transaction could not have entitled the assessee to claim benefit under the law. Similarly, the Hon'ble Mumbai Tribunal held in the case of Balaji Textiles Industries Pvt Ltd Vs. ITO (49 ITD 177) that issue of bills by the alleged suppliers was not a conclusive proof On the same facts, in the case of ITO Vs. Sunsteel (92 TTJ 126), the Hon'ble Ahmedabad Tribunal upheld 10% of the purchase price as inflated amount where suppliers were found to be non-existent and did not respond to the notices issued by the Department Similarly, the Hon'ble Delhi Tribunal in the case of Uniword Telecom Ltd. Vs. Addl. CIT (45 DTR 433) upheld the addition on account of unverifiable purchases to the extent of 10%. In the cited case, the assessee- company was found to be engaged in claiming Cenvat credit fraudulently on the basis of invoices issued by non-existing parties ("vendors") It arranged for bogus invoices from non-existent or fake vendors without really obtaining the corresponding goods. In the post-search enquiry, the Central Excise Department found that invoices were received from 19 vendors but goods were not received. In some cases, the proprietors, etc., of such vendors admitted to

P a g e | 7 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) have issued bogus bills for receiving nominal commission The AO also made independent enquires in 16 cases of the vendors by issuing notices under section 133(6) of the Act to them. None of the vendors, who received the notices, responded to it. At the same time, notices could not be served on 8 vendors as such notices were returned un-served by the postal authorities. As some of the vendors were not found to be existing at the address given in the bills, the Ward Inspector was deputed to ascertain their existence or otherwise. Six vendors were found to be non-existent at the given addresses It was mentioned by AO that the assessee produced only the ledger but other books of account and documents were not produced There were deficiencies in the books of account as mentioned above Therefore, the books of account were rejected by invoking the provisions contained in section 145(3) of the Act. Thereafter, he evaluated the evidence in respect of purchases from 19 vendors in his order It was held by the Hon'ble Delhi Tribunal that during the search by Central Excise Department, the stock was tallied completely. The assessee's books of account could not be rejected only on the reason that purchase of goods from ten vendors were not established or no day-to-day register of consumption was maintained by the assessee, but in view of three parties due to attended circumstances, 10 per cent of purchase price could be disallowed. It was held that it was an admitted position that the assessee was unable to bring any independent evidence on record regarding purchases from 10 vendors. This being the admitted position, it could not be said that lower authorities had erred in taking into account the enquiries conducted by the central excise authorities The enquiries showed that the assessee was not able to prove purchases from 10 vendors by bringing on record any evidence from them Nine vendors were found to be non-existent and one vendor stated that the goods shown in the bills were not manufactured at all by it as it was manufacturing totally different goods. There was a complete stock tally on 14/01/2006, which led to a clear inference that even though some vendors might not be in existence and some might be existing for short period, the goods mentioned in their bills were actually used in the process of manufacturing of the final products, which were cleared on payment of duty and, thus, were accounted for in the books, the monies involved in purchase of goods were withdrawn in cash by the vendors sometimes directly and sometimes by channelizing the money through two concerns. The money was withdrawn by Shri R Kumar many a times and the channelizing concerns were under the control of relatives of the Directors. However, there was no evidence to prove that the monies flowed back to the assessee or its Directors There was also a categorical statement by the counsel that none of the accounts of the vendors was introduced by the Directors of the assessee- company The assessee had not maintained day-to-day stock register of consumption and it was explained that looking to a large number of items required for production of final goods, the maintenance of a register was not feasible, and although the goods from aforesaid vendors were not entered in the gate register, maintained only after the year 2004, all the goods were entered in the statutory registers. On the basis of aforesaid facts, it could not be said that the books of account contained material defects so as to lead to their rejection on account of incompleteness or unreliability The only thing which could be said was that the purchase price of the goods from 10 vendors did not stand established on the basis of evidence produced by the assessee. In coming to this conclusion, the Hon'ble Bench of Tribunal had taken into account the fact that there was no evidence of flow back of the money, production of unaccounted goods, diversion of goods purchased for some other purpose or clandestine removal of finished products The books of account

P a g e | 8 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) could not be rejected and the profits could not be estimated de hors the book results However, the Hon'ble Tribunal was also of the view that looking to various attendant circumstances, namely, (1) non-verifiability of bills of 10 vendors, (ii) withdrawal of money in cash by vendors, (iii) non verifiability of transportation of goods from the premises of the vendors to the factory of the assessee on account of wrong vehicle numbers, and (iv) acceptance of the assessee that 10 vendors did not discharge their statutory liability thereby paying the duties on their behalf, some adjustment had to be made to the total income of the assessee in respect of purchases from these parties. Since such purchases were only for a limited number of vendors, and no other material defect had been established by the AO, the non-maintenance of day-to-day stock register not being of any great importance in view of actual sale of finished goods, the book results of the assessee for this year were in line with the book results of the earlier years. However, there was no corroborative evidence to support the bills from 4 or 5 parties made in this year. There were attendant circumstances such as withdrawals by the vendors in cash, non- payment of excise duty by them and absence of day-to-day stock registers. These facts did lead to a reasonable inference that the arrangement was to inflate purchase price. Looking to the fact that no direct evidence could be produced by the assessee to support the bills, it was held that it would be fair to restrict the disallowance to 10 per cent of the purchase price mentioned in the bills. In the case of CIT Vs. Golcha Properties (Pvt.) Ltd. (227 ITR 391) (Rajasthan HC), it was held that the genuineness of transaction, could be decided on the basis of primary facts on records. Hence the department was not required to lead a clinching evidence to prove that purchases were bogus. In view of the foregoing discussion, the percentage of disallowance of bogus purchases/ accommodation entry has to be based on the facts of each case. The same cannot be generalized in every case. The decisions rendered in the cases of Sanjay Oil Cake Industries (supra) and Vijay Protein Ltd. (supra) are however distinguishable on facts since in case of Sanjay Oil Cake Industries, a specific finding was given by the Assessing Officer that purchases were made from the alleged bogus suppliers at higher rate as compared to the other parties In the case of Vijay Proteins Ltd. (supra), after examining the bank account, it was established that cheques issued to various parties were deposited in one of the accounts, which were found to be owned by the assessee himself but there are no such circumstances in the present case. Moreover, the question whether entire purchases should be disallowed or addition should be restricted to the profits embodied on sale proceeds was answered by Hon'ble Gujarat High Court in the case of CIT Vs. President Industries (258 ITR 654)and Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Balchand Ajit Kumar (263 ITR 610). Considering the above decisions, it is clear that only the profits embodied on sale proceeds should be taxed instead of addition on account of entire purchases. Looking to the circumstantial evidence in the present case, it is evident that impugned purchases from the alleged supplier was not genuine and such purchase was actually made from open market One has to consider the totality of facts, surrounding circumstances and human probability for arriving at such a conclusion. In the present case, the assessee is not willing to come clean and hence one will have to take resource to material on record for arriving at any conclusion. In the present case, the appellant was found to be following a well planned and executed method of accounting for such bogus bills and creating

P a g e | 9 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) supporting documents in the form of transport documents etc. so that the excise authorities could not detect the illegal method which was also intended to claim bogus cenvat credit from such bills to set off the liability of excise duty. In view of these facts, this is not a case where the entire cash has been siphoned off by debiting the bogus purchases. This is a case where at the most, the purchases/expenses might have been inflated. Therefore, relying upon the decision of Hon'ble Gujarat High Court, in the case of Simit P Seth (356 ITR 451) and considering the facts in the appellant's case, I direct the AO to restrict the addition to Rs.16,30,54,466/- [i.e.12.5% of Rs. 130,44,35,730/- e the purchases against which bogus cenvat credit benefit is availed by the appellant), against addition made by the AO of Rs. 19,56,65,360/-, thereby reducing the said addition by an amount of Rs. 3,26,10,894/- The addition to the extent of Rs. 16,30,54,466/- is therefore confirmed. The appellant gets relief of Rs.3,26,10,894/- Ground nos. 6 to 7 raised by the appellant are accordingly Partly allowed.” 5. During the course of appellate proceedings before us the ld. counsel vehemently contended that the case of the assessee was reopened merely on the basis of show cause notice issued by the Central Excise Authority without application of mind. The ld. Counsel also submitted that assessee has not given any effect to cenvat credit in the profit and loss account. He contended that assessee has not claimed any expenditure in the profit and loss account and submitted that when no claim of any expenditure in respect of excise on purchases is claimed there is no question of disallowing the same. He submitted that merely on the basis of show cause notice the assessing officer had incorrectly in unjustified manner arrived at the escaped income. He referred the following judicial pronouncements:

I. Hon’ble Bombay High Court in the case of Pr.CIT Vs. Vaman International Pvt. Ltd. Income Tax Appeal No.1940 of 2017 II. Hon’ble Bombay High Court in the case of Pr.CIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxman.com 153 (Bombay) III. Hon’ble Gujarat High Court in the case of Pr.CIT, Rajkot-3 Vs. Vrundavan Ceramics (P) Ltd. (2018) 95 taxmann.com 13 (Gujarat) IV. Hon’ble Supreme Court in the case of Pr.CIT, Rajkot-3 Vs. Ganga Glazed Tiles (P) Ltd. (2020) 117 taxmann.com 108(SC). V. Hon’ble ITAT in the case of ItalicaFloor Tiles (P) Ltd. V. ACIT (2015) 57taxmann.com 454 (Rajkot Tribunal) The ld. Counsel further submitted that in various judicial pronouncements it is held that no addition can be made merely on the

P a g e | 10 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) basis of show cause notice issued by the Central Excise Authorities. He further submitted that AO has made the impugned addition purely on the basis of show cause of the excise authority on the basis of which no final assessment was made by the excise authority.

P a g e | 11 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) way of bogus cenvat credit availed by the assessee. On the basis of the aforesaid information contained in the show cause notice issued by the Central Excise Authority, the AO opined that there was under assessment of income to the amount of cenvat credit of Rs.17,90,28,750/- being bogus cenvat credit availed by the assessee during the financial year 2010-11. As discussed above after taking into consideration the show cause notice issued by the Central Excise Authority the assessing officer has estimated addition on account of bogus purchases to the amount of Rs.19,56,65,360/- as discussed supra in this order. However, the ld. CIT(A) had restricted the disallowance to the extent of Rs.16,30,54,466/- being 12.5% of the purchase amount of Rs.130,44,35,730/-. 8.Regarding technical grounds of appeal no.1 and 2 the assessee submitted that merely on the basis of show cause notice the reopening of assessment by the assessing officer is not correct and appropriate and referred the judicial pronouncements in the case of Shodiman Investments (P) Ltd. wherein the Hon’ble Mumbai High Court held as under: “Where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT (Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled position in law that re- opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction.”

The Hon’ble jurisdictional High Court of Bombay in the case of Pr.CIT Vs. Shodiman Investment Pvt. Ltd. (2018) 93 taxman.com 153 (Bom) held that reopening notice has to be issued by the assessing officer on his own satisfaction not on borrowed satisfaction. In that case the assessing officer has reopened the assessment on the basis that information has been received from the search action conducted u/s 132 of the Act in the case of Mahasagar Securities Ltd. that suspicious transactions has been taken place in the bank account of the company and its related company. In that case the case was reopened

P a g e | 12 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) on the basis of information received from DIT(Investigation) about the suspicious transaction, however, that material was not further linked by any reason to come to the conclusion that the assessee indulged in any activity which could give rise to reason to believe on the part of the assessing officer that income chargeable to tax has escaped assessment. Therefore, the Hon’ble High Court held that assessing officer had merely issued reopening notice on the basis of intimation received from the DDIT(Investigation) which were clearly in breach of the settled position in law that reopening notice has to be issued by the assessing officer on his own satisfaction and not on borrowed satisfaction. The ld. Counsel has also referred the decision of Hon’ble ITAT in the case of Italica Floor Tiles (P) Ltd. The relevant extract of the decision is reproduced as under:

“Section 69, read with section 148, of the Income-tax Act, 1961 Unexplained investments (Suppressed sales) Assessment years 2005-06 to 2007-08 Assessee filed its return of income which was processed under section 143(1)- Subsequently. Assessing Officer noted that a show cause notice was issued upon assessee by Director General of Central Excise Intelligence for reason that there was a suppression of sales by assessee for purpose of levy of excise duty. On basis of said notice, a reopening notice was issued upon assessee. It was noted that Assessing Officer as per recorded reasons, had not verified income-tax return of assessee vis-à-vis alleged escapement of income to arrive at satisfaction to effect that assessee had not disclosed such income in return of income He directly concluded that alleged sales, on which excise duty was allegedly not paid by assessee, was income chargeable to tax and had escaped assessment under Income-tax Act - Whether without verifying relevant particulars declared in income-tax return, information contained in show cause notice of Excise Department could not be reason to believe about escapement of taxable income under Income-tax Act Held, yes Whether, therefore, impugned reopening notice issued upon assessee was to be set aside Held, yes [Paras 19 and 20] [In favour of assessee).”

The reasons recorded by the assessing officer are reproduced as under:

ANNEXURE

P a g e | 13 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) REASONS RECORDED U/ 148 (2) of the IT ACT, 1961, FOR REOPENING THE ASSESSMENT IN THE CASE OF M/S. HARISONS STEEL LED PAN: AAACH8891D for A.Y.: 2011-12 1. The return of income in this case for A Y 2011-12 was e-filed by the assessee on 30.09.2011 declaring total income at Rs.5,47,74,130/-. The return was processed u/s 143(1) of the Act. Further assessment order u/s 143(3) r.w.s.147 was completed on 29. 11 2013 determining total income at Rs.5,90,14,418/ 2. Subsequently, specific information was received in this office from the office of the DDIT(INV), Unit -6(4), Mumbai vide letter dated. 09.03.2017, that a survey action was conducted by Unit-6(4), Investigation Directorate, Mumbai in the case of M/B Sikkim Ferro Alloys Ltd and its group concerns. During the course of survey proceedings, at one of the premises, a show cause notice dated 04.06.2014 issued to M/s Harison Steels Ltd by the DGCEI, Ahmadabad Zonal Unit was found wherein bogus CENVAT Credit amounting to Rs 59,17,57,273/- is sought to be disallowed The Annexure- A to the said show-cause notice contains the details of bogus CENVAT availed by the assessee. Para 15.2 of the show-cause notice is reproduced as under:- “On perusal of Annexure-A, it is revealed that M/s Harisons Steel Ltd, Wada during the period from 01.05.2009 to 27.06.2013 has shown to have received 38500 MT of excisable goods under the invoices of dealers which infact has actually not been received and utilized by M/s Harisons Steel Ltd, Wada and to compensate the non-receipt of corresponding goods from these dealers, M/s Harisons Steel Ltd, Wada has purchased SS Scrap of lower quality from open market. Therefore, CENVAT Credit amounting to Rs.59,17,57,273/ (Rupees Fifty Nine Crores Seventeen Lakhs Fifty Seven Thousand Two Hundred Seventy Three only) wrongly availed and utilized by M/s Harisons Steel Ltd, Wada during the period from 01.05.2009 to 27.06.2013 is required to be demanded and recovered from them under the provisions of Rule 14 of SENVAT Credit Rules, 2004, read with Section 11A(4)jerstwhile proviso to Section 11A(1) of the Central Excise Act, 1944" On perusal of the Annexure A has been perused and it is found that the amount of bogus CENVAT Credit availed by the assessee during the FY 2010-11 amounts to Rs.17,90,28,759/ On perusal of the above information received, it is found out that the amount of income chargeable to tax has escaped assessment by way of bogus CENVAT Credit availed by M/s Harisons Steel Limited in A.Y 2011-12 amounts to Rs. 17,90,28,759/- Please refer to Annexure-1 enclosed. 3. Section 147 of the Act contemplates three primary conditions for the initiation reassessment of proceedings:  There should be a reason to believe, that  Income chargeable to tax, has

P a g e | 14 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2)  Escaped assessment The undersigned has carefully applied his mind to the above information. The specific credible/tangible/concrete information so received gives a substantial basis for the formation of a reason to believe to initiate reassessment u/s 147 of the Act Further, there is no doubt on the fact that the above amounts to income chargeable to tax' and the benefit so arising to the assessee should have been offered to tax. Further, since this is fresh information received by the undersigned, there is an escapement of/ or under assessment of such income. Also, since the above received information was not in the possession of the undersigned earlier, it can be reasonably concluded that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. 4. In this case a return of income was filed for the year under consideration and regular assessment u/s 143 (3) was made on 29.11.2013. Since, 4 years from the end of the relevant year has expired in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded in above Para. It is pertinent to mention here that in this case the assessment was made as stipulated u/s 2 (40) of the act. However as discussed in reason to believe in this case the income chargeable to tax has been under assessed by an amount of Rs. 17,90,28,759/-. 5. In view of the above, I am satisfied that that the amount of bogus CENVAT Credit availed by the assessee during the FY 2010-11 amounting to Rs.17,90,28,759/-have escaped assessment and have remained to be brought to tax 6. Therefore, I have a reason to believe that, income chargeable to tax, amounting to Rs.17,90,28,7590/- has escaped assessment, within the meaning of provision of section 147 of the Income Tax Act for the A.Y. 2011-12. Further this escapement of income is by reasons of the failure on the part of the assessee to disclose full and truly, all material facts necessary for his assessment for A.Y. 2011-12. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue the notice u/s 148 has been obtained separately from Pr. CIT-12, Mumbai as per provisions of section 151 of the act.” 9. After perusal of the reason recorded and in the facts of the case of the assessee we consider that assessing officer has reopened the case of the assessee on the basis of tangible material received i.e. show cause notice issued by the central excise authority and upon due satisfaction formed an opinion as reflected in the reason recorded supra in this order. The ground of appeal no.2 pertaining to cross examination was not discussed. Therefore, the grounds of appeal no.1 and 2 are dismissed.

P a g e | 15 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2)

P a g e | 16 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) and VAT has been paid on such goods. The assessee also submitted that sales of goods were properly recorded in the books of accounts and also submitted copy of sale register to the assessing officer. It was also explained that all the transactions were routed through banking channel. The assessee has also submitted statement of purchases for the period 01.04.2010 to 31.03.2011 along with detail of invoices no. date, name of the party, description quantity, value and corresponding cenvat, excise duty. The assessee has also submitted copies of invoices along with delivery challans and transaction document before the assessing officer along with the copies of ledger accounts of the parties from whom purchases were made during the years. The assessee has also submitted copies of Form IV (accounts of raw materials and components) which show the detail of goods received and issued for production and quantity of goods manufactured. The assessee has also submitted copies of register R.G 1(daily stock account) showing details of finished goods produced and sold/removed during the year and also submitted copies of bank statement from 01.04.2010 to 31.03.2011. The assessee has also explained and submitted that in respect of majority of parties they have received the goods as consignee.

“Section 68 of the Income-tax Act, 1961 Cash credit (Suppressed Sales) Assessment year 2008-09 Excise department carried out raid at premises of assessee and a show cause notice was issued alleging suppression of sales of goods On basis of such show cause notice issued against assessee and material accompanying such notice, Assessing Officer made additions to income of assessee on account of suppressed sales It was noted that said show cause notice merely presented material collected by Excise department suggesting view of department that this was a case of large scale excise

P a g e | 17 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) evasion - Before final order levying excise duty could be passed, these facts had to be established and till then, it only remained in realm of stand of department which was yet to be tested Further, there was no independent material brought on record by Assessing Officer other than those which were already collected by Excise department and which were yet to be verified Whether, on facts, additions made by Assessing Officer to income of assessee were unjustified and deserved to be deleted Held, yes [Paras 10 and 11] [In favour of assessee)”

“17.1 Thus, from the above, it is seen that Tribunal had returned a finding of fact that the assessee had filed copies of invoices in respect of the purchases, extracts of stock ledger showing entry/exit of the materials purchased, copies of bank statements to show that payment for such purchases were made

P a g e | 18 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) through regular banking channels, etc., to establish the genuineness of the purchases. Thereafter, Tribunal held that Assessing Officer could not bring on record any material evidence to show that the purchases were bogus. Mere reliance by the Assessing Officer on information obtained from the Sales Tax Department or the statements of two persons made before the Sales Tax Department would not be sufficient to treat the purchases as bogus and thereafter to make addition under Section 69C of the Act. Tribunal has also held that if the Assessing Officer had doubted the genuineness of the purchases, it was incumbent upon the Assessing Officer to have caused further enquiries in the matter to ascertain genuineness or otherwise of the transaction and to have given an opportunity to the assessee to examine/cross-examine those two parties vis-a-vis the statements made by then before the Sales Tax Department. Without causing such further enquiries in respect of the purchases, it was not open to the Assessing Officer to make the addition under Section 69C of the Act.”

“Where High Court upheld Tribunal's order holding that AO was not justified in making addition to assessee's income in reassessment proceedings in respect of profit earned on suppressed sales because there was no independent material brought on record by Assessing Officer other than those which, were already collected by Excise Department and which, were yet to be verified, SLP filed against order of High Court was to be dismissed.”

. 15. During the course of assessment vide letter dated 26.11.2018 the assessee submitted that the show cause notice dated 04.06.2014 issued by the Central Excise Department as referred by the assessing officer was only a show cause notice and not any order passed by the Central Excise Authority. The assessee also submitted that it had duly explained its case and based on their explanation and clarification the excise department had not passed any order raising any claim whatsoever against the show cause notice issued by them to the assessee. It is evident from the aforesaid facts and material that the assessee has categorically brought to the notice of the assessing

P a g e | 19 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) officer that no demand is raised for the reason of reversal of the wrongly availed cenvat credit as mentioned in the show cause notice issued by the excise department. It is also pointed out that merely on the basis of show cause notice issued by the excise department the AO has wrongly concluded that there was escapement of income without linking with relevant evidences and material. Since no such expenditure debited in the profit and loss account, therefore, there is no question of any disallowance to be made in the case of the assessee. 16. The assessee also submitted that the cenvat credit was not an income but it is the taxes which are paid on the purchases and same can be claimed as a set off against payment of excise duty arising of manufacturing and sale of product. Since, assessee company has not debited any expenditure to the profit and loss account and at all assessee company even has not claimed the cenvat credit, therefore, the basis of addition and disallowance made by the assessing officer is unjustified. 17. During the course of assessment proceedings vide letter dated 13.08.2019 has also submitted before the assessing officer that as per the consisting accounting policy followed by the assessee company in respect of excise duty on purchases the same was carried to the balance sheet and not claimed as expenditure in the profit and loss account.

P a g e | 20 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) Therefore, following the decision of Hon’ble Gujarat High Court and the Hon’ble Supreme Court as discussed supra in this case we consider that the addition made in the case of the assessee on estimated basis merely referring the show cause notice of the Central Excise Department is not justified. It is also undisputed fact that excise department has not passed any final order on the basis of alleged show cause notice that assessee has actually incurred the any expenditure of payment of excise duty out of books of account or it has earned any income which was not disclosed in the books of account. Therefore, we consider that decision of the ld.CIT(A) in sustaining the impugned addition based on the order of the assessing officer is not justified, therefore, the same is deleted. Accordingly ground of appeal no.3 of the appeal of the assessee is allowed.

ITA No. 3957/Mum/2023

Ground No. 1 & 2:

Ground No. 3:

P a g e | 21 ITA Nos. 3943 & 3957/Mum/2023 Harisons Steel Ltd. Vs. DCIT-12(2)(2) no. 3 of ITA No. 3943/Mum/2023 as mutatis mutandis this ground no. 3 is allowed.

Order pronounced in the open court on 10.06.2024

Sd/- Sd/- (Sandeep Singh Karhail) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 10.06.2024 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai गार्ड फाईल / Guard file. 5.

सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.