Chhattisgarh Steel Castings Private Limited Vs PCIT (Chhattisgarh High Court)
Summary: The Chhattisgarh High Court dismissed the assessee’s writ appeal challenging the addition arising from shortage of finished goods and raw material detected during a Central Excise survey, holding that there was no illegality, irregularity or jurisdictional error in the Single Judge’s refusal to interfere with the order passed in revision under Section 264 of the Income-tax Act, 1961. For AY 2009-10, the assessee, engaged in manufacturing CTD bars, rounds and M.S. ingots, had returned a loss of Rs.4,09,13,490/-, whereas the assessment under Section 143(3) determined the loss at Rs.3,49,46,476/-. A Central Excise survey conducted on 22.10.2008 had revealed shortage of 171.05 MT of finished goods and 45.655 MT of raw material, with the discrepancy valued at Rs.57,41,853/-. The Assessing Officer found that the stock difference was not recorded in the books and added the amount to the assessee’s income, besides separately initiating penalty proceedings under Section 271(1)(c). Instead of filing an appeal against the assessment order, the assessee invoked Section 264 and argued that the entire value of the alleged shortage could not be treated as income and that, at most, only the gross profit attributable to the alleged unaccounted sales could be added. The Revisional Authority rejected this contention. The Single Judge thereafter dismissed the writ petition, finding no violation of natural justice or lack of jurisdiction. In the writ appeal, the assessee reiterated that only gross profit on the alleged sales should be assessed and relied upon Hapag Lloyd India (P) Limited Vs. Principal Commissioner of Income Tax (2022) 139 Taxmann.com 128 (Bombay) regarding the width of Section 264 revisional jurisdiction. The Division Bench, however, noted the Revisional Authority’s finding that the discrepancy detected during the Central Excise survey had been accepted by the assessee as sales outside the books and that excise duty had also been paid on that amount. Importantly, the raw material cost relating to those sales had already been accounted for in the regular books. On these facts, the Court held that the assessee’s plea to restrict the addition merely to gross profit could not be accepted and sustained the treatment of the entire unaccounted sales as income. The Court also reiterated that penalty proceedings under Section 271(1)(c) are separate from assessment proceedings; therefore, filing a Section 264 revision against the quantum addition would not assist the assessee in appellate proceedings concerning the penalty. Finding no error warranting interference with the Single Judge’s order, the Division Bench dismissed the writ appeal as devoid of merit.
Cases Discussed
- Hapag Lloyd India (P) Limited Vs. Principal Commissioner of Income Tax, (2022) 139 Taxmann.com 128 (Bombay) — relied upon by the assessee to contend that the revisional jurisdiction under Section 264 is sufficiently wide to encompass its grievance.
FULL TEXT OF THE JUDGMENT/ORDER OF CHHATTISGARH HIGH COURT
1. The appellant/writ petitioner has filed this writ appeal assailing the order dated19.03.2025 passed by the learned Single Judge of this Court in WPT No. 132 of 2014, by which, the learned Single Judge has dismissed the petition filed by the appellant/writ petitioner.
2. The brief facts as projected by the petitioner is that the petitioner/Assessee is engaged in the business of manufacturing of CTD bars, Rounds, M.S. Ingots etc. During the assessment year 2009-10, the Assessing Officer has passed an order under Section 143 (3) of the Act 1961 on 31.12.2011 and assessed loss of Rs.3,49,46,476/- though the Assessee company has filed return showing total loss of Rs.4,09,13,490/-. During the course of verification of books of accounts and records, it was noticed that there has been survey operation conducted by the Central Excise Authority on 22.10.2008, wherein it was found that there was shortage of closing stock of finished goods at 171.05 metric tonnes (MT) and raw material of 45.655 MT and the concerned Authority has worked out the under valuation at Rs.57,41,853/-. The Assessing Officer also found that the Assessee Company has not mentioned the said difference in stock in its books and thus the aforesaid amount was added to the total income of the assessee and for furnishing inaccurate details of income, penalty proceedings under Section 271 (1) (c) of the Act 1961 was separately initiated against the petitioner. The Assessee Company has not filed any appeal against the assessment order and filed revision under Section 264 of the Act 1961. In the said revision, the petitioner/Assessee has raised a ground that in making addition to Rs.57,41,353/- to the total income of the assessee for alleged shortage of stock found at the time of survey by Central Excise Authority is unjust and bad in law and at the most GP, if any, could be added and not the amount of whole shortage worked out by the Excise Authorities. However, learned Revisional Authority has not accepted the said grounds and dismissed the revision petition.
3. In the order under challenge, the learned Single Judge has observed as under:-
“6. Admittedly, the petitioner has not filed proper income tax return for the Assessment Year 2009-10 and shown the total loss at Rs.4,09,13,490A. The Assessing Officer while passing the order dated 31.122011 under Section 143 (3) of the I. T. Act 1961 on the basis of survey conducted by the Excise Authority found that the valuation of the stock at Rs.57,41,353/- has not been mentioned in the books of account of the petitioner So the Assessing Officer has added the said income and the petitioner has also admitted the same before the Excise Authority. So the petitioner Company has not mentioned the difference of stock of Rs.57,41,353/- in their books of accounts. Further; in spite of issuance of notice by the Department of the Assessment proceedings the petitioner failed to offer any satisfactory explanation. The petitioner has also not preferred any appeal against the assessment order and only preferred revision petition under Section 264 the Act
7 Further; while dismissing the revision, the Revisional Authority has noted that the petitioner/Company has not submitted any satisfactory explanation regarding the discrepancy at the time of assessment proceedings or at the time of penalty proceedings. It was found that discrepancy of stock found at the time of Central Excise survey was accepted by the petitioner Company as the sales outside books of accounts and the petitioner has also paid excise duty on that amount. It was further noted that entire sale done outside books of accounts is income to be added, as the raw material cost has been accounted for in the regular books of accounts. Thus the petitioner’s contention that only GP should be added to income could not be accepted. It is settled that penalty proceedings are separate from assessment proceedings and, therefore, filing of revision petition under Section 264 of the Act 1961 against quantum addition would not be of any help to the petitioner in the Appellate proceedings against the penalty under Section 271(1) (c) of the Act 1961.
8. Considering the scope of writ jurisdiction and the fact that the petitioner has failed to establish any violation of natural justice or competency of jurisdiction, this Court is not inclined to interfere with the aforesaid findings recorded by the Re visional Authority
9. Consequently, the petition fails and is hereby dismissed”
4. The writ appeal has been filed by the appellant reiterating the same plea challenging the order dated 19.03.2025 passed in WPT No. 132 of 2014 and praying that the alleged shortage is not assessable as the appellant’s income, but only the gross profit on alleged sales if any may be treated as the appellant’s income.
5. Learned counsel for the appellant submits that the order passed by the learned Single judge is bad in law and the learned Single Judge has not appreciated the fact that the order passed by the CIT suffers from perversity and illegality. He further submits that the scope of writ petition against the revision order is even larger because there is no other alternative remedy. He further relies upon the judgment of of the Bombay High Court in Hapag Lloyd India (P) Limited Vs. Principal Commissioner of Income Tax (2022) 139 Taxmann.com 128 (Bombay). By placing reliance on paragraphs 11 and 12 of the said judgment, learned counsel submits that the scope of revisional jurisdiction is wide enough to embrace the petitioner’s grievance and that is was wrongly rejected.
6. On the other hand, learned counsel for the respondent would support the order passed by learned Single Judge. He submits that in the proceedings, there was substantial compliance of natural justice as show cause notice was issued to the Assessee and he has failed to offer any satisfactory explanation regarding the shortfall in closing stock and raw material. He submits that the competent Authority was having complete jurisdiction to pass the order impugned.
7. We have heard learned counsel for the parties and perused the material available in the record.
8. Considering the submissions advanced by the learned counsel for the parties, perusing the impugned order and the finding recorded by the learned Single Judge while dismissing the writ petition that there is no violation of natural justice or competency of jurisdiction. Even otherwise, bare perusal of the record it is manifest that while dismissing the revision, the Revisional Authority has noted that the petitioner/Company has not submitted any satisfactory explanation regarding the discrepancy at the time of assessment proceedings or at the time of penalty proceedings. It has also been found that discrepancy of stock found at the time of Central Excise survey was accepted by the petitioner Company as the sales outside books of accounts and the petitioner has also paid excise duty on that amount. Further it has been noted that entire sale done outside books of accounts is income to be added, as the raw material cost has been accounted for in the regular books of accounts. Thus the petitioner’s contention that only GP should be added to income could not be accepted.
9. Be that as it may, it is settled that penalty proceedings are separate from assessment proceedings and, therefore, filing of revision petition under Section 264 of the Act 1961 against quantum addition would not be of any help to the petitioner in the Appellate proceedings against the penalty under Section 271 (1) (c) of the Act 1961.
10. In view of foregoing, we are of the considered view that the learned Single Judge has not committed any illegality, irregularity or jurisdictional error, warranting interference of this Court.
11. Accordingly, the writ appeal being devoid of merit is liable to be and is hereby dismissed.
