Assistant Commissioner Of Income Tax (Central)-2, Central Revenuebuilding, Civil Lines, Raipur (Chhattisgarh) – v. Mahamaya Steel Industries Ltd., B-8 & B

(Tax Case No.12/2022) Digitally 2025:CGHC:45166-DBsigned bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.09.0614:05:19signed bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.09.0614:05:19+0530HIGH COURT OF CHHATTISGARH AT BILASPUR 2025:CGHC:45166-DB NAFR TAXC No. 12 of 2022 {Arising out of order dated 21-10-2021 passed by the Income TaxAppellate Tribunal, Raipur Bench, Raipur in ITA No.62/RPR/2018} -(Assessment Year 201314) Assistant Commissioner of Income Tax (Central)-2, Central RevenueBuilding, Civil Lines, Raipur (Chhattisgarh) – 492001 ... Appellant versus Mahamaya Steel Industries Ltd., B-8 & B-9, Sector-C, Urla IndustriesArea, Sarora, Raipur, District Raipur, Chhattisgarh ... Respondent For Appellant /: Mr. Amit Chaudhari, Senior Standing Counsel forRevenuethe Income Tax Department through VideoConferencing and Mr. Vijay Chawla, Advocate. For Respondent /: Mr. Sumit Nema, Senior Advocate with Mr. AnandAssesseeDadariya, Advocate. -Division Bench: Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sanjay Kumar Jaiswal, JJ. Judgment on Board(04/09/2025) Sanjay K. Agrawal, J. 1. This appeal preferred under Section 260A of the Income Tax Act,1961 (for short, ‘the IT Act’) was admitted for hearing on 27-8-2024by formulating the following substantial question of law: -1961 (for short, ‘the IT Act’) was admitted for hearing on 27-8-2024by formulating the following substantial question of law: - “Whether on the facts and in law, the Income Tax AppellateTribunal was justified in deleting the addition of Rs.19,09,67,165/- by the Assessing Officer on the ground thatthe assessee had suppressed its yield and had indulged inunaccounted production and sales?” 2. The aforesaid question of law arises on the following factual backdrop: - 3. The respondent herein/assessee is engaged in the manufacturing ofre-rolled products such as heavy steel structural, joist and girder.Search and seizure on the premises of the assessee was conductedon 21-6-2011, assessment was completed on 30-3-2016 and orderwas passed under Section 153A read with Section 143(3) of the ITAct for the assessment year 2013-14. The Assessing Officer hasmade an addition on account of unaccounted sales based on anestimated production yield of 89% in the assessee’s SMS Division.The Assessing Officer adopted an estimated yield ratio andproceeded to calculate alleged unaccounted production andconsequential sales, resulting in substantial additions over multipleyears. The Assessing Officer has made addition of ₹ 19,09,67,165/- by recording following finding:- “5.2I have carefully perused the submission of the assessee.However, the submission of the assessee is not acceptable forthe following reasons: (i) The assessee has failed to justify the reasons convincinglyfor low yield in SMS Division in the F.Y. under considerationas compared to the average annual yield. (ii) Further, the assessee also failed to explain the reasons forlow G.P. and N.P. in the year under considerationsatisfactorily despite the fact that many factors crucial for determination of G.P. & N.P. were not adverse in the yearunder consideration. Therefore, the contention of the assessee not to reject thebooks of account is not accepted. (iii) As regards submission on low yield the contention of theassessee is also far from satisfactory. During the year underconsideration the assessee has shown the yield in the SMSDivision at 82.42% which indeed is very low as compared tothe average annual yield of 89% adopted by the erstwhileA.O. while completing the assessment of last 7 A.Ys includingthe Block Period from A.Y. 2006-07 to 2011-12 and 2012-13.The basis of adopting yield of 89% has been discussed atlength in the assessment order for the above A.Ys. Therefore,the contention of the assessee on account of yield % is notaccepted.” determination of G.P. & N.P. were not adverse in the yearunder consideration. Therefore, the contention of the assessee not to reject thebooks of account is not accepted. (iii) As regards submission on low yield the contention of theassessee is also far from satisfactory. During the year underconsideration the assessee has shown the yield in the SMSDivision at 82.42% which indeed is very low as compared tothe average annual yield of 89% adopted by the erstwhileA.O. while completing the assessment of last 7 A.Ys includingthe Block Period from A.Y. 2006-07 to 2011-12 and 2012-13.The basis of adopting yield of 89% has been discussed atlength in the assessment order for the above A.Ys. Therefore,the contention of the assessee on account of yield % is notaccepted.” 4. Feeling aggrieved and dissatisfied with the order of the AssessingOfficer making addition under Section 153A of the IT Act, theassessee preferred an appeal before the Commissioner of IncomeTax (Appeals) and the CIT (Appeals) by order dated 2-2-2018allowed the appeal and set-aside the addition of unaccounted salesmade by the Assessing Officer. The CIT (Appeals) has summarisedthe allegations made by the AO in paragraphs 10 & 11 of its order asunder: - “10Vide this office letter dated 7.12.2017 in F. No. CIT(A)-II/RPR/Appeal Proceed/2017-18 dated 07.12.2017 the AOwas asked to explain the basis behind adoption of yield at89%. Vide her letter dated 21.12.2017 the AO enclosed theassessment order of the appellant for the AY 2006-07 to2012-13 and relied upon the findings and conclusions by herpredecessor in the search assessment proceedings completedin the case of the appellant. I also observe that the additionmade in the search assessments by adopting 89% yield in theSMS division stands deleted by my ld. Predecessor in hisorder. As regards decline in GP rate the appellant contendedthat the Iron and steel sector had been going through achallenging phase owing to sluggish domestic demand and constrains of iron ore supply along with rise in steep risingiron ore prices. It was brought to my notice that the cost ofpower in SMS division has increased by nearly 56% incomparison to the FY 2009-10 and in the case of rolling milldivision it has increased by nearly 52%. My attention wasalso invited to the increase in cost of raw material and inputsin the rolling mill division such as blooms and billets as wellas the increase in the cost of inputs of SMS division. I observe that the AO has made the addition by estimatingthe yield at 89% of the total raw material consumed in theSMS division after rejecting the books fo accounts of theappellant. The only reason for rejection of books of accountsadduced by the AO is that the appellant had declared yield inthe SMS division less than 89%. In the opinion of the AO ascan be seen, the yield of the appellant company should havebeen same in all the years as the nature of the business is thesame as it was during the period covered under the searchproceedings. In the assessment order the AO has not broughton record any irregularity or defect in the books of accountsbills and vouchers and other documentary evidencespertaining to the year under consideration. What can benoticed from the assessment order is that the AO has basedhis assessment on the outcome of the search assessmentproceedings for the search period covered during action u/s.132 of the Act and extended the same to the impugnedassessment year i.e. 2013-14 which in my opinion had nobearing for the assessment proceedings of the impugned AY. There is no merit in the contention of the AO that theconclusions drawn in the search assessment proceedings andenhancements made, which in fact were deleted, can be madebasis for assessing the income of other subsequent yearswithout considering the facts and circumstances of earlieryears or the year in question. Each year assessment is aseparate assessment which attains finality for the year unlessdisturbed by cogent facts and materials and does not governlater years. The facts and circumstances of each year are tobe considered separately and must find reference in theassessments completed. 11.I further observe that the books of accounts of theappellant was subject to tax audit and since the appellant isdealing excisable products it has filed excise returns onmonthly basis as well as the VAT returns as per sales tax laws.The evidences of which were produced before the AO whoexamined the same including the bills and vouchers. With a view to bring on record the basis behind adoption of yield at89% the AO was asked to convey the basis for doing so. Fromthe remand report of the AO I find that reliance has beenplaced by her on the assessment order passed u/s. 153A r.w.s143(3) for the search period i.e. AY 2006-07 to 2012-13.Importantly even in the assessment order pertaining tosearch period there is no reference of any seized material orany other documentary evidences to establish the fact thatthe appellant had indulged in unaccounted production andunaccounted sales. The additions were made mainly on thepretext that the average yield in the industry is nearly 89%and the yield declared by the appellant is low as compared tothe yield shown by other manufacturers of Chhattisgarh.There could be several reasons for variation of GP and NP butthe variation per se is not sufficient to draw an inference thatthe books of accounts are liable to be rejected u/s. 145 untiland unless specific defect or irregularity are pointed out andbrought on record pertaining to the books of accounts of theappellant.” 5. Questioning legality, validity and correctness of the order passed by the CIT (Appeals) deleting the addition made by the AO, theRevenue preferred an appeal before the ITAT and the learned ITATconcurred with the findings of the CIT (Appeals) and dismissed theappeal by the impugned order resulting into filing of appeal beforethis Court.Revenue preferred an appeal before the ITAT and the learned ITATconcurred with the findings of the CIT (Appeals) and dismissed theappeal by the impugned order resulting into filing of appeal beforethis Court. 6. Mr. Amit Chaudhari, learned Senior Standing Counsel for theIncome Tax Department i.e. the appellant herein/Revenueappearing through Video Conferencing, would submit that both theauthorities were absolutely unjustified in deleting the addition ofunaccounted sales based on an estimated production yield of 89%which is based on the evidence available on record as a result ofsearch and seizure conducted and the assessment order has rightlybeen passed under the provisions contained in Section 153A readIncome Tax Department i.e. the appellant herein/Revenueappearing through Video Conferencing, would submit that both theauthorities were absolutely unjustified in deleting the addition ofunaccounted sales based on an estimated production yield of 89%which is based on the evidence available on record as a result ofsearch and seizure conducted and the assessment order has rightlybeen passed under the provisions contained in Section 153A read with Section 143(3) of the IT Act which could not have beenreversed by the CIT (Appeals) and could not have been affirmed bythe ITAT, therefore, the appeal be allowed. 7. Mr. Sumit Nema, learned Senior Counsel appearing on behalf of with Section 143(3) of the IT Act which could not have beenreversed by the CIT (Appeals) and could not have been affirmed bythe ITAT, therefore, the appeal be allowed. 7. Mr. Sumit Nema, learned Senior Counsel appearing on behalf of the respondent herein/assessee, would support the impugnedorders passed by the CIT (Appeals) and the ITAT and submit thatthe aforesaid findings recorded by the two authorities deleting theaddition of ₹ 19,09,67,165/- were made only on the basis ofsuspicion which was totally impermissible in law in light of thedecision of the Supreme Court in the matter of DhakeswariCotton Mills Limited v. Commissioner of Income Tax, West Bengal1. Therefore, the aforesaid findings are totallyfindings of fact and there is no demonstrable perversity or errorapparent on the face of record cited by the appellant/Revenuewarranting interference by this Court. As such, the findings withregard to unaccounted sales based on estimated production yieldhave rightly been set-aside by the CIT (Appeals) which has rightlybeen affirmed by the ITAT and therefore the present appealdeserves to be dismissed. 8. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through therecord with utmost circumspection.rival submissions made herein-above and also went through therecord with utmost circumspection. 9. The Assessing Officer, for the reasons noticed herein-above, madean addition of ₹ 19,09,67,165/- on account of alleged unaccountedan addition of ₹ 19,09,67,165/- on account of alleged unaccounted 1(1954) 2 SCC 602 sales based on an estimated production yield of 89% in the SteelMelting Shop (SMS) Division of the assessee. However, for thereasons mentioned above, finding that the Assessing Officer hasproceeded on the basis of suspicion and conjectures, the CIT(Appeals) has set-aside that addition, which the ITAT hasconcurred with by holding as under: - “9.We have carefully considered the rival submissions andperused the orders of the authorities below as well asmaterial placed before us by way of paper book referred toand relied upon at the time of hearing. We observe that thebasis of additions towards lower yield of production by theassessee in its SMS/Furnace division is on account ofcomparison with average industry yield of 89% assumed bythe AO. Significantly, in this regard, we observed that theCIT(A), on objection raised by the assessee to such presumedyield, wrote letter dated 07.12.2017 to the AO for the purposeof understanding the basis behind adoption of yield at 89%.The AO, however, vide letter dated 22.12.2017 merelyenclosed the assessment order for AY 2006-07 to 2012-13 forthe purposes of adopting such standard yield. It is evidentthat the AO in the instant case has merely proceeded on thefindings arrived at by the AO in A.Y. 2006-07 to 2012-13. Atthis stage, it would be pertinent to take note of decision of theco-ordinate bench concerning A.Ys. 2009-10 to 2012-13 onthe same very issue in the case of the assessee in ITA Nos.232 to 235/RPR/2014 order dated 07.11.2019. The co-ordinate bench after taking note of the relevant factsemerging on record, found substantial merit in the decisionrendered by the CIT(A) in those years and thus endorsed theaction of the CIT(A) in deleting such additions on account oflower yield. … 10.In the light of the view taken by the co-ordinate benchin the case of assessee in earlier assessment years, the issue isno longer res integra. It is evident that issue is squarelycovered by the decision of the co-ordinate bench in assessee’sown case for AYs. 2009-10 to 2012-13 wherein also theappeal of the Revenue was dismissed after elaboratediscussion on factual and legal matrix. The revenue could notbring any cogent reason to take a departure from the earlierview. Thus, in consonance with the view expressed earlier, 10.In the light of the view taken by the co-ordinate benchin the case of assessee in earlier assessment years, the issue isno longer res integra. It is evident that issue is squarelycovered by the decision of the co-ordinate bench in assessee’sown case for AYs. 2009-10 to 2012-13 wherein also theappeal of the Revenue was dismissed after elaboratediscussion on factual and legal matrix. The revenue could notbring any cogent reason to take a departure from the earlierview. Thus, in consonance with the view expressed earlier, we do not see any merit in the plea of the Revenue forrestoration of the additions deleted by the CIT(A) on thisscore.” 10. However, at this stage, it would be appropriate to notice thedecision of the Supreme Court in Dhakeswari Cotton Millsdecision of the Supreme Court in Dhakeswari Cotton Mills Limited(supra) in which their Lordships of the ConstitutionBench of the Supreme Court dealing with the jurisdiction whilemaking order under Section 23(3) of the Income Tax Act, 1922 andalso considering the scope of power under Section 23(3) and limitsthereon, held that while making the assessment under sub-section(3) of Section 23 of the Act, the Income Tax Officer is not entitledto make a pure guess and make an assessment without reference toany evidence or any material at all, and observed as under:- “9.As regards the second contention, we are in entireagreement with the learned Solicitor General when he saysthat the Income Tax Officer is not fettered by technical rulesof evidence and pleadings, and that he is entitled to act onmaterial which may not be accepted as evidence in a court oflaw, but there the agreement ends; because it is equally clearthat in making the assessment under sub-section (3) ofSection 23 of the Act, the Income Tax Officer is not entitled tomake a pure guess and make an assessment withoutreference to any evidence or any material at all. There mustbe something more than bare suspicion to support theassessment under Section 23(3). The rule of law on thissubject has, in our opinion, been fairly and rightly stated bythe Lahore High Court in Gurmukh Singh v. CIT[2].” 11. Reverting to the facts of the present case in light of the principles oflaw relating to Section 145(3) of the IT Act and also considering theprinciples of law laid down by their Lordships of the SupremeCourt in Dhakeswari Cotton Mills Limited(supra), it is quitelaw relating to Section 145(3) of the IT Act and also considering theprinciples of law laid down by their Lordships of the SupremeCourt in Dhakeswari Cotton Mills Limited(supra), it is quite 21944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah) 11. Reverting to the facts of the present case in light of the principles oflaw relating to Section 145(3) of the IT Act and also considering theprinciples of law laid down by their Lordships of the SupremeCourt in Dhakeswari Cotton Mills Limited(supra), it is quitelaw relating to Section 145(3) of the IT Act and also considering theprinciples of law laid down by their Lordships of the SupremeCourt in Dhakeswari Cotton Mills Limited(supra), it is quite 21944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah) vivid that the CIT(Appeals) and the ITAT, both, after objectivelyanalysing the factual situation, found complete absence of anyadverse material against the assessee which can support theallegation of the AO towards unaccounted production presumed onthe basis of alleged low yield declared by the assessee. Thus, incomplete absence of any adverse material, both the authoritieshave concurrently reached to the conclusion that the additionmade by the AO is baseless and without any evidence, therefore,the rejection of books of accounts is invalid and addition made bythe AO on account of alleged suppression of yield is based uponmere guess work. It was further held by the two authorities thatthe yield declared by the assessee is neither low nor the booksmaintained by the assessee could be impeached by some tangibleevidence/material on record and therefore the ITAT has rightlyconfirmed the order of the CIT (Appeals) and proceeded to dismissthe appeal filed by the Revenue. In our considered opinion, theconcurrent finding recorded by the two authorities holding that theaddition made by the Assessing Officer for the assessment year2013-14 is baseless and without any evidence/material, is a pureand simple finding of fact based on the evidence available onrecord, which is neither perverse nor contrary to the record.Accordingly, we proceed to dismiss the appeal and the substantialquestion of law is answered in favour of the assessee and againstthe Revenue. (Tax Case No.12/2022) 12. In the result, the appeal stands dismissed leaving the parties to bear their own cost(s). Sd/- (Sanjay K. Agrawal) Judge Sd/- (Sanjay Kumar Jaiswal)Judge