ACIT Vs Mahamaya Steel Industries Ltd. (Supreme Court of India)
The matter arose from an appeal under Section 260A of the Income Tax Act, 1961, concerning whether the Income Tax Appellate Tribunal (ITAT) was justified in deleting an addition of ₹19,09,67,165 made by the Assessing Officer (AO) on account of alleged suppression of yield and unaccounted production and sales.
The assessee, engaged in manufacturing steel products, was subjected to search and seizure proceedings, following which an assessment was completed under Section 153A read with Section 143(3) for the assessment year 2013–14. The AO made additions based on an estimated production yield of 89% in the Steel Melting Shop (SMS) division, comparing it with prior years and industry averages. The AO rejected the books of accounts, citing a lower declared yield of 82.42% and unsatisfactory explanations for reduced gross and net profit.
Read HC Judgment in this case: No Addition if Assessment Based on Mere Guesswork & Suspicion: Chhattisgarh HC
The assessee challenged the addition before the Commissioner of Income Tax (Appeals) [CIT(A)], who set aside the addition. The CIT(A) found that the AO had not identified any specific defect or irregularity in the books of accounts, which were supported by audited records, excise returns, VAT returns, bills, and vouchers. The AO had relied primarily on earlier assessment orders and industry averages without producing any seized material or documentary evidence to substantiate allegations of unaccounted production or sales. The CIT(A) also held that conclusions drawn in earlier search assessments, which themselves had been deleted, could not be applied to a subsequent assessment year, as each year must be assessed independently.
