ACIT Vs Mahamaya Steel Industries Ltd. (Chhattisgarh High Court)
The appeal was filed under Section 260A of the Income Tax Act, 1961, raising the question of whether the Income Tax Appellate Tribunal (ITAT) was justified in deleting an addition of ₹19,09,67,165 made by the Assessing Officer (AO) on the ground of alleged suppressed yield and unaccounted production and sales.
The assessee, engaged in manufacturing steel products, was subjected to search and seizure proceedings, and an assessment order was passed under Section 153A read with Section 143(3) for the assessment year 2013–14. The AO made additions based on an estimated production yield of 89% in the Steel Melting Shop (SMS) division, comparing it with earlier years and industry averages. The AO rejected the assessee’s books of accounts, citing lower declared yield (82.42%) and insufficient explanation for reduced gross and net profit.
Read SC Judgment in this case: SC Dismisses Revenue Appeal as Assessment Based on Guesswork Without Proof
The assessee challenged this before the Commissioner of Income Tax (Appeals) [CIT(A)], who set aside the addition. The CIT(A) observed that the AO had not identified any specific defect or irregularity in the books of accounts, bills, vouchers, or supporting documents. The AO had relied solely on past assessment orders and assumed industry yield, without presenting any material evidence or seized documents to substantiate claims of unaccounted production or sales. The CIT(A) also noted that conclusions from earlier search assessments, which themselves had been deleted, could not be applied to subsequent assessment years, as each year must be assessed independently. Further, the assessee had provided explanations for variations in yield and profit, including increased costs of raw materials, power, and challenging market conditions.
