Panchmahal Steel Ltd Vs PCIT (ITAT Ahmedabad)
Conclusion: Once CESTAT had given a findings that the purchases in question were not bogus, then, additions proposed to be made on the basis of show-cause notice from Central Excise Directorate had no basis which the same could be sustained.
Held: AO discovered a show cause notice from the Central Excise Directorate indicating that assessee had claimed Cenvat credit of Rs. 4,37,07,420/-, which was disallowed. The officer identified that assessee had reported bogus purchases, prompting the reopening of the case with a notice under Section 148. An assessment order issued resulted in the addition of Rs. 27,53,17,729/-for bogus purchases, which comprised Rs. 25,04,72,276/- for the value of goods and Rs. 2,48,45,453/- for Cenvat credit claimed. Upon reviewing the records, PCIT observed that the assessment order was erroneous as it failed to account for the total claimed amount of Rs. 27,98,24,733/-, which included the previously mentioned amounts along with a VAT element of Rs. 45,07,004/-. Consequently, a notice under Section 263 was issued citing the erroneous nature of the assessment and requiring assessee to show-cause why the order should not be set aside for a fresh assessment. Assessee responded with a voluminous submission claiming that proposed additions made were unfounded. Assessee argued that the assessee had not claimed VAT as an expense in their Profit & Loss account (which arguments has now been dropped before us). However, Principal CIT observed that the assessee’s accounting practices implied that VAT was included in the purchase costs, albeit netted off in the accounts. It was held that the very basis on initiation of proceedings under Section 147 had been vacated since additions were made in the hands of the assessee on the basis of show-cause notice from Central Excise Directorate indicating that assessee had claimed Cenvat Credit of Rs. 4.37 crores on bogus purchases. However, once CESTAT has given a findings that the purchases in question were not bogus, then, additions proposed to be made under Section 147 of the Act and 263 of the Act had no basis which the same could be sustained. Thus, if the very foundation of a revision was set aside by a higher authority, any connected proceedings, such as under Section 263 lose their validity.
