DCIT 2 Vs Mahamaya Steel Industries Limited (Supreme Court of India)
In the matter before the Supreme Court of India and the Chhattisgarh High Court, the dispute concerned an addition of ₹15,94,08,394 made by the Assessing Officer (AO) on account of alleged unaccounted production and sales based on estimated production yield in the assessee’s Steel Melting Shop (SMS) Division.
The assessee was engaged in manufacturing re-rolled steel products such as heavy steel structural, joist, and girder. A search and seizure operation was conducted on 21 June 2011, following which assessment proceedings for Assessment Year 2016-17 were completed under Section 153A read with Section 143(3) of the Income Tax Act, 1961.
Read HC Judgment in this case: Chhattisgarh HC Deletes Income Tax Addition as Estimated Yield Was Based on Guesswork
The AO alleged suppression of production and unaccounted sales by adopting an estimated production yield of 89%. For comparison, the AO referred to audit reports and balance sheets of other businesses in the same industry where yield percentages as high as 97% were reported in manufacturing MS Ingots/Billets. Based on these comparisons, the AO rejected the assessee’s books of account under Section 145(3) and framed the assessment under Section 144. The AO concluded that the shortfall in declared yield represented unaccounted production and sales and accordingly made an addition of ₹15.94 crore.
