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.
