ORIENT STEEL AND INDUSTRIES LIMITED,KOLKATA vs. D.C.I.T CIR - 3,KOLKATA, KOLKATA

This appeal by assessee is arising out of revision order of CIT, Kolkata dated 28.03.2013. Assessment was framed by DCIT, circle-3, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2008-09 vide his order dated 20.12.2010.

We have heard this matter ex parte because none is present for and on behalf of the revenue. Revenue has filed a petition for adjournment asking for adjournment in eight matters. The reason given by revenue in its petition dated 02.03.2016. Ld. Counsel Smt. Nilima Joshi vehemently opposed the adjournment petition stating the reasons that this is appeal against revision order passed u/s. 263 of the Act by the CIT and appeal was filed in 2013 and even the effect giving order to the order of CIT has already passed by the AO creating huge demand. According to her, this matter was already heard on number of occasions and on none of the occasions assessee asked for adjournment. In view of these facts, we proceed to hear the matter ex parte for the reason that the revenue is seeking adjournment on frivolous ground and this is a regular feature. Hence, without giving adjournment, as the appeal is pending since 2013, we proceeded to decide it ex parte. 3. The only issue in this appeal of assessee is against the revision order of CIT u/s. 263 of the Act revising the assessment framed by AO u/s. 143(3) of the Act directing the AO to carry out necessary verification and assess the income on account of inclusion of excise duty and sales tax/VAT from the total turnover. 4. Briefly stated facts are that the assessee is engaged in the manufacturing of hot rolled, cold strips, flat rolled products, iron and non-alloy steel and various components of railways. The assessee is following mercantile system of accounting. Original assessment was completed by DCIT, Circle-3, Kolkata u/s. 143(3) of the Act for relevant AY 2008-09 after scrutinizing the Orient Steel & Ind. Ltd. AY 2008-09 books of account and various details and documents furnished by assessee as per requisition of the AO from time to time. Subsequently, the CIT-1, Kolkata on examination of assessment records and audited accounts of the assessee observed that the sale is exclusive of excise duty and sales tax/VAT. According to CIT, total excise duty payable is Rs.20,22,78,780/- whereas the assessee has debited a sum of Rs.22,18,24,714/- on account of such excise duty. According to CIT, the AO has failed to apply his mind to the facts stated in the return of income and accompanying accounts without carrying out necessary verification in spite of inconsistencies and inaccuracy in the audited accounts in respect to excise duty and sales tax. According to him, the order passed by AO is erroneous and prejudicial to the interest of revenue, therefore, he set aside the assessment order and directed the AO to carry out necessary verification and frame assessment. Aggrieved, assessee came in appeal before Tribunal.

Ld. Counsel for the assessee before us, first of all, stated that this revision proceeding carried out by the CIT u/s. 263 of the Act is in term of audit objection raised by audit party and the relevant note put up by audit party reads as under: “1. As per Sech.-26: Notes on Accounts attached with the Annual A/c.'s for the A.V. 2008-09. It was stated that Sales is exclusive of Excise Duty, Sales Tax. However from the details of Sales as given in Sec.-13, it was seen that Sales is inclusive of Sales Tax. A reconciliation is required. As per Sech,-20 : Notes on Accounts & Annexure-X of TAR it was stated that Cenvat Credit availed & utilized were adjusted in raw material to Stores consumption a/c. Now if Sales is inclusive of Excise Duty than total Excise duty payable by the 'a' for Sales was Rs.20,22,78,780/-. But as per Annexure-X paid Excise Duty of Rs.18,72,25,716/- by deducting Cenvat A/c. 'A' further debited of Rs.3,45,98,998/- on A/c. of Excise Duty in the P&L. Hence a debited total amount of Rs.21,88,24,714/- (18,72,25,716 + 3,15,98,998), so this was an excess debited of Rs.1,95,45,934/- (22,18,24,714 - 20,22,78,780), So these was under asst. it of Income of Rs.1,95,45,934/- having tax effect of Rs.66,43,663 & Intt. u/s.234B Rs.21,92,409/-, total TE Rs.88,36,072.

Ld. Counsel for the assessee drew our attention to the CIT’s order wherein it is observed that the AO has erroneously allowed the claim of Rs.22,1824,714/- instead of Rs.20,22,78,780/-

It was explained by the Ld. Counsel that how the Excise Duty on sale arisen at Rs.20,22,78,780/- @ 16.32% of sales of Rs.144,17,32,087/-. She explained that out of total sales of Rs.147,37,10,849/- the CIT only computed or deducted processing charges of Rs.3,19,78,762/- to arrive at sales figure of Rs.144,17,32,087/-. According to her, actually an amount of Rs.3,63,02,076/- received for scrap and waste product includes captive consumption of Rs.2,80,000/-, which does not attract Excise Duty and cannot be taken for calculation of Excise Duty payable. She explained that there was change in Excise Duty rates from April, 2007 to February, 2008 and the rate was 16% plus cess and thereafter from 2nd March, 2008, rate was 14% plus cess. Hence, the total Excise Duty payable on finished goods and waste products excluding captive consumption was Rs.20,16,90,721/- not Rs.20,22,78,780/- as computed by CIT. She also explained by facts and figures that how CIT has erroneously added the CENVAT credit taken at Rs.1,87,22,55,716/-, which should have been at Rs.18,79,57,899/- and payment in cash of Rs.3,45,98,998/- and arrived at Rs.22,18,24,714/- from which CIT has deleted only Excise Duty payable on finished goods and wastage. According to her, CIT has not considered the Excise Duty paid in cash of Rs.2,08,66,176/- on raw material, stores, capital goods etc. and 3