Case Law Details
Bansiwala Iron & Steel Rolling Mill Vs DCIT (ITAT Jaipur)
The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, allowed the appeal filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals) dated 28.07.2025 for Assessment Year 2010-11. The dispute related to additions made by the Assessing Officer (AO) on account of alleged clandestine removal of finished goods, unexplained sales, and unexplained investment based on findings of the Customs and Central Excise Department.
The assessee challenged the reopening of assessment under Sections 147 and 148 of the Income Tax Act, 1961, as well as additions made under Sections 69A and 69C. The grounds raised included objections to reassessment proceedings, alleged violation of the Supreme Court decision in GKN Driveshafts (India) Ltd. v. ITO, and challenge to additions based on estimated gross profit and unexplained capital.
The facts recorded by the Tribunal showed that a search and verification was conducted by the Department of Customs and Central Excise at the factory premises of the assessee. During the search, evidence allegedly indicating clandestine removal of finished goods was gathered. Based on this information, notice under Section 148 was issued on 19.03.2015 after obtaining approval from the specified authorities.
The AO completed reassessment proceedings and made an addition of Rs.16,52,362 under Section 69A on the ground that the assessee had earned undisclosed gross profit on unaccounted sales amounting to Rs.1,22,57,879 by applying a gross profit rate of 13.48%. Another addition of Rs.53,02,759 was made under Section 69C towards alleged unexplained investment in initial unaccounted capital involved in suppressed sales.
The assessee appealed before the Commissioner of Income Tax (Appeals), contending that the reassessment proceedings were without jurisdiction and that the additions were based only on allegations made by the Central Excise Department. The assessee argued that the Excise Department itself had subsequently withdrawn its allegations. However, the CIT(A) dismissed the appeal and confirmed the additions made by the AO.
Before the ITAT, the assessee relied upon a subsequent order of the CIT(A) dated 29.10.2025 for Assessment Year 2013-14, wherein additions made on similar allegations of clandestine removal of finished goods had already been deleted. The CIT(A) in that order had relied upon the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Principal Bench, which had held that the allegations of clandestine removal were not sustainable.
The ITAT reproduced substantial portions of the CESTAT order. The CESTAT had observed that there was no evidence regarding purchase of large quantities of raw material or flow back of money. It also noted that no cash was seized during searches and no major discrepancies were found during stock verification.
The CESTAT further examined allegations based on 42 triplicate copies of goods receipts (GRs) recovered from the records of a transport company. The Revenue alleged that these GRs reflected clandestine clearances without corresponding excise invoices. The assessee contended that discrepancies were due to typographical errors and that original GRs supported by invoices existed for actual dispatches.
The CESTAT considered explanations provided by the assessee and noted that several buyers had clarified during cross-examination that they had not received any non-duty-paid consignments. Affidavits from other buyers also stated similarly. The transporter explained that discrepancies in triplicate copies could arise because certain details were entered later through telephonic communication rather than through carbon copies.
The ITAT observed that the entire additions made by the AO in the present income tax proceedings were founded upon the same allegations of clandestine sales that were not sustained by the CESTAT. Since the allegations themselves had failed before the CESTAT, the Tribunal held that the additions confirmed by the CIT(A) had no basis to survive.
Accordingly, the ITAT deleted the additions made under Sections 69A and 69C and allowed the appeal of the assessee.
Appellant Rpresented by : Sh. Mahendra Gargieya, Adv
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been preferred by assessee against the order of National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax Appeal (hereinafter referred to as “Ld. CIT(A)”) dated 28.07.2025 u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “Act”).
2. The assessee in this appeal has taken following grounds of appeal:-
1. The very action taken u/s 147 r.w.s 148 by the ld. AO and confirmed by the CIT(A)/NFAC is bad in law, without jurisdiction and being void ab-initio, the same kindly be quashed. Consequently, the impugned assessment framed u/s 143(3)/148 dated 30.03.2016 also kindly be quashed.
2. The ld. CIT(A)/NFAC seriously erred in not directing the ld. AO to decide the objections filed by the appellant within a reasonable period of time and further seriously erred in proceeding to make the assessment through notices issued u/s 143(2) & 142 of the Act, which was in a direct contravention of the binding directions of the Honble Supreme Court given in the case of GKN Driveshafts (India) Ltd. vs. ITO & ORS 259 ITR 0019 (2002) and therefore, the impugned order so passed, deserves to be quashed.
3. The addition and disallowances made in the impugned order dated 30.03.2016 u/s 143(3) r.w.s 148 made by the Id. AO and confirmed by the CIT(A)/NFAC are bad in law, for want of jurisdiction and for various other reasons and hence the same may kindly be deleted.
4. Rs.16,52,362/-: The Id. CIT(A)/NFAC-New Delhi erred in law as well as on the facts of the case in confirming the addition made by ld. AO by applying estimated GP rate of 13.48% on the alleged suppressed sale of Rs. 1,22,57,879/-, merely based on a search conducted by the Central Excise Department (even though the said Department itself has taken back their allegation) and merely on suspicion, surmises & conjectures, without arriving at an independent op inion/satisfaction over the impugned addition. The allegation of suppressed sale being completely contrary to the provisions of law and facts and the consequent addition of the suspected gross profit thereon so made, also being completely contrary to the provisions of law and facts and contrary to the submissions and evidences placed on record hence, the impugned addition kindly be deleted in full.
5. Rs. 53,02,759/-: The Id. CIT(A)/NFAC- New Delhi further erred in law as well as on the facts of the case in confirming the estimated addition made by Id. AO on account of alleged the unexplained investment in the initial unaccounted capital involved @50% of the suppressed sale (less the estimated addition of the gross profit), u/s 69/69C of the Act. The addition so made being completely contrary to the provisions of law and facts and rather being the result of suspicion, surmises and conjectures, hence, the same kindly be deleted in full.
6. The ld. CIT(A)/NFAC- New Delhi further erred in law as well as on the facts of the case in confirming the charging interest u/s 234A, 234B & 234C of the Act. The appellant to tally denies its liability of charging of any such interest. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full.
7. The appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.
3. The facts of the case, in brief, are that a search/verification was conducted in the factory premises of the assessee by the Department of Customs & Central Excise, Jaipur and evidences pertaining to clandestine removal of finished goods were gathered during the year under consideration, and accordingly notice u/s 148 of the Act was issued on 19.3.2015 for the Assessment Year 2010-11 after obtaining due approval of the specified authorities. The Assessing Officer (AO), after considering the entire facts on record, made addition of Rs.16,52,362/- u/s 69A of the Act on the ground that these are unaccounted sales and gross profit earned thereon has not been disclosed. Further, a sum of Rs.53,02,759/- was added to the total income of the assessee u/s 69C of the Act on account of unaccounted capital introduced by the assessee.
4. Aggrieved by the order of AO, the assessee filed appeal before the Ld. CIT(A) challenging the notice issued u/s 148 of the Act by the AO being bad in law and without having jurisdiction and accordingly, the assessment order needs to be quashed. The Ld. CIT(A) vide the impugned order dismissed the appeal of the assessee both on legal issue as well as on the facts of the case and confirmed the additions made on the account of unexplained investment and unexplained sales.
5. Aggrieved by the order of the Ld. CIT(A) the present appeal has been preferred before this Tribunal. During the course of proceedings before us, the appellant brought to our notice the order of the Ld. CIT(A) dated 29.10.2025 for the Assessment Year 2013-14 wherein the Ld. CIT(A) has already deleted the entire additions made by the AO on the same ground that the entire addition was based on an allegation that there was a clandestine removal of finished goods as recorded by the Central Excise Authorities were found to be not sustainable by the Appellate Tribunal (CESTAT) vide Hon’ble Tribunal No. Principal Bench-Court No.! Excise Appeal No.50072 of 20!6 (CESTAT). The decision of the Hon’ble Tribunal has been quoted by the Ld. CIT(A) in its order dated 29.10.2025 for the Assessment Year 2013-14 as under:-
“41. We also find that learned Commissioner was correct in pointing out that there is no evidence of purchase of such large quantity of raw-material or flow back of money. He also correctly pointed out that no cash was seized during searches nor was any major discrepancies noticed during stock taking.
42. In view of all the above we find that appeal filed by Revenue is liable to be rejected. Demand of Rs. 20,12,479/- on 536.5 MT of goods which are said to be clandestinely removed during the period 3.1.2008 to 28.6.2012
43. This part of the demand was raised in the SCN and confirmed in the impugned order based on 42 Triplicate copies of GRs recovered from bound books of New Vikas Transport Co. which when compared with the original copy of the GR and the invoice issued by the assessee showed discrepancies.
44. The case of the Revenue is that in respect of these 42 GRs which were found in the office of New Vikas Transport Co., goods were transported but there is no corresponding excise invoice to evidence payment of duty. The case of assessee is that there were some typographical errors resulting in discrepancies but it does not demonstrate that another set of goods were cleared as reflected in the Triplicate copy of the GRs without invoices and without paying duty in addition to clearing the goods on the strength of the original copy of the GRs which are supported by the invoices. The findings of the Commissioner with respect to B is a sub-paragraph of paragraph 132 which is reproduced below:
B. Investigation on the basis of statements of Shri Hussain Khan, Labour Contractor, Electricity Consumption Meter reading provided by AVVNL for the month of three months i.e., April, May and June 2012 and further corroborated by statement of Shri Vasudev Bherwani, part time accountant has established that production work was done in the factory on Sundays as per the normal capacity and was not recorded in the RG-1 Register properly, therefore, the demand of duty on the quantified value in the table to the Show Cause Notice which is based upon 42 GRs of New Vikas Transport Company, Ajmer alleging clandestine clearance of 536.69 MT of excisable goods valued at Rs 1.83 crores is maintainable. The argument given by the notice that demand is raised on technical defect in triplicate/office copy of GR and minor variation in truck numbers due to typographical and other error is an afterthought and therefore, no satisfactory answer is given to production on Sunday and to the statements of Shri Hussain Khan Labour Contractor and Shri Vasudev Bherwani who is noticee’s part time employee. I hold that duty on the amount of value of Rs. 1,83,33,257/- amounting to Rs. 20,12,479 is maintainable and consequential interest along with penalty is justified.
45. Learned counsel submits that the Adjudicating authority has accepted whatever was alleged in the SCN and brushed aside their entire submissions before him with respect to this part of the demand as an afterthought and held that no satisfactory explanation was given for the production on Sunday and to the statements of the Labour Contractor Shri Hussain Khan and part time accountant Shri Vasudev Bharwani. Learned Departmental Representative has prepared a detailed chart of the discrepancies found with respect to the 42 GRs. Learned Counsel explained the reasons for the discrepancies in respect of each of the invoices and took the bench through copies of the relevant documents. The summary of the submissions by the learned counsel are as follows:
46. Of the 42 GRs, there were five against which the goods were not supplied at all by them due to the fact that subsequent to the issue of the GRs, the orders were cancelled by the buyers. In respect of the remaining 37 GRs, goods were despatched and original copies of the GRs (which accompany the goods) were procured by either the department or by the assessee from the buyers. The question which arises is whether goods were supplied against the triplicate copies of the GRs without paying duty to the buyers. The 42 GRs pertain to 27 different buyers of which statements of were recorded by the department. They were cross examined during the adjudication during which they clarified that they have never received any non-duty paid consignments. Of the remaining 18, most have filed affidavits to the effect that they had not received any non-duty paid consignments. GR is a third party document prepared by the transporter over which the assessee has no control and if there are any discrepancies in them, it cannot be held against them. During cross examination before the adjudicating authority, Shri Moin Khan, the owner of New Vikas Transport Company clarified that it is their practice that the name of the consignor, truck number and date are entered in the GRs using carbon paper but details of the consignee and the actual weight are obtained at the time of loading and entered in the original and duplicate copy of the GRs which accompany the goods along with the invoice. These details are obtained by the transporter on phone and entered in the triplicate copy of the GR (the office copy). Therefore, these details are not entered using carbon copy. At times, in noting down the details on phone some errors may occur resulting in discrepancies between the original copy of the GRs (which reflect the correct details) and the triplicate copy of GRs (which are filled after ascertaining on phone and may result in some errors). Learned Counsel points out that in the chart provided by the learned Authorised Representative of the Department, there were no discrepancies between the invoice and the original GRs for this reason. He further submitted that GR is not a document under the Central Excise law and cannot be held against them. Learned Departmental Representative supports the impugned order and submits that the GR is the document which evidences that the goods were cleared from the factory and transported to the customer. There is no reason for two copies of the GR (original and triplicate) to have different details. This only supports the finding that the goods were removed twice-once with the invoice as reflected in the original copy of GR and again as per the details in the triplicate copy of the GR for which there is no corresponding invoice. This inference is further supported by the facts that the factory’s electricity consumption on Sundays was the same as on any other day but no production was recorded on Sundays in the RG-1 register (Production register). It is further confirmed by the statements of the labour contractor Shri Hussain Khan and the part time accountant.
47. We have considered the arguments on both sides. We find that the entire findings of the Commissioner in the impugned order on this count are rather cryptic upholding the allegations in the SCN and dismissing the submissions by the Appellant assessee as after thought. Learned Departmental Representative has presented details of the discrepancies before us, GR wise and learned Counsel has made submissions explaining each case GR wise which we have summarised in the above paragraph. The question before us is considering these submissions and records whether there is sufficient evidence to uphold the allegation of clandestine clearance of goods as reflected in the triplicate copies of the 42 GRs or not.”
6. Since the main allegation of clandestine sales was not sustained before the Hon’ble CESTAT as stated above, there was no reason for the Ld. CIT(A) to confirm the additions made by the AO on this ground.
7. We have considered the order of the Ld. CIT(A) dated 29.10.2025 for the Assessment Year 2013-14. We have also perused the order of the Hon’ble CESTAT (Supra) and we are of the view that since the allegation of clandestine sales was not sustained before the Hon’ble CESTAT, the additions, made by the AO and confirmed by the Ld. CIT(A) vide the impugned order, have no legs to stand and accordingly, the same deserve to be deleted.
8. In the result, the appeal is allowed.
9. In fact of the appeal of the assessee is Order pronounced in the open court on 23.03.2026
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