Case Of The Principal Commissioner Of Income Tax Rajkot-3 v. Vrundavan Ceramics Pvt. Ltd. In Tax Appeal

C/TAXAP/1166/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1166 of 2018With R/TAX APPEAL NO. 1167 of 2018With R/TAX APPEAL NO. 1168 of 2018With R/TAX APPEAL NO. 1169 of 2018With R/TAX APPEAL NO. 1170 of 2018With R/TAX APPEAL NO. 1171 of 2018With R/TAX APPEAL NO. 1172 of 2018 With R/TAX APPEAL NO. 1173 of 2018 ========================================================== PR COMMISSIONER OF INCOME TAXVersusSUNHILL CERAMICS P LTD ========================================================== Appearance:MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI andHONOURABLE MR.JUSTICE B.N. KARIA Date : 24/09/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These Appeals arise in similar background. We may record facts from Tax Appeal No. 1166 of 2018.facts from Tax Appeal No. 1166 of 2018. 2. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 19.01.2018. The issue pertains to Appellate Tribunal dated 19.01.2018. The issue pertains to assessment year 2004-05. Following questions are presented for our consideration: “A.Whether on facts and circumstances of the case Appellate Tribunal is justified in law and on facts in not appreciating the provisions of section 145 of the IT Act which provides for rejection of book result of the assessee where the Assessing officer is not satisfied about the correctness or completeness of the accounts of the assessee? B.Whether on facts and circumstances of the case Appellate Tribunal is justified in law and on facts in deleting the addition made on account of suppressed sale by using the material collected by the Excise Department including the statements of relevant witnesses recorded during the search?” 3. Similar issues came up for consideration before this Court in case of The Principal Commissioner of Income Tax Rajkot-3 vs. Vrundavan Ceramics Pvt. Ltd. in Tax Appeal No. 82 of 2016 and connected appeals. These appeals were dismissed in following manner: “10. Having thus cleared the peripheral issues, we may examine the central question viz. did the Assessing Officer have sufficient material at his command to believe evasion of tax? We have noticed the broad modus operandi stated to have been adopted by the assessees as per the excise show-cause notices. Admittedly, these show-cause notices are only at such stage without in any of these cases the final orders of adjudication have been passed by the Excise authorities. These show-cause notices thus merely present the material collected by the Excise department suggesting the view of the department that this is a case of large scale excise evasion. Before final order levying excise duty with interest and “10. Having thus cleared the peripheral issues, we may examine the central question viz. did the Assessing Officer have sufficient material at his command to believe evasion of tax? We have noticed the broad modus operandi stated to have been adopted by the assessees as per the excise show-cause notices. Admittedly, these show-cause notices are only at such stage without in any of these cases the final orders of adjudication have been passed by the Excise authorities. These show-cause notices thus merely present the material collected by the Excise department suggesting the view of the department that this is a case of large scale excise evasion. Before final order levying excise duty with interest and penalty can be passed, these facts have to be established through by parte proceedings. Till then, it only remains in the realm of the stand of the department which is yet to be tested.11.In addition to confronting the assessee with the contents of the show-cause notice issued by the Excise department, the Assessing Officer has done little else. He of course called upon the assessee to respond to the allegations contained in the show-cause notice, to the statements and materials accompanying such show-cause notice. As noted, the assessee gave a brief reply denying the allegations and pointing out that the charges are yet to be proved. If the Assessing Officer thereafter wanted to make additions on the basis of such materials, the same had to be brought on record. By merely producing the copies of the statements of the witnesses accompanying the show-cause notices, such statements and the veracity thereof does not get automatically established. The Assessing Officer merely cosmetically gave an opportunity to the assessee to meet with such allegations, virtually, shifting the burden of proving the evasion of duty that had taken place on the assessee. We have perused the entire order of assessment. There is no independent material brought on record by the Assessing Officer other than those which were already collected by the Excise department and which, as noted earlier, are yet to be verified. 12. Counsel for the assessees drew our attention to a judgement of Customs, Excise and Service Tax Appellate Tribunal in which, the order of adjudication passed in case of one of the ceramic units (not an assessee before us) by the Adjudicating authority came to be set aside. However, for the following reasons we do not wish to place any reliance on this judgement : • Firstly, the excise show-cause notices in case of the present assessees are yet to be adjudicated. What would be the material on record during such proceedings is not possible for us to foresee. • Secondly, the Tribunal has mainly proceeded on the basis of absence of section 4A of the Central Excise Act at the relevant time which, in the opinion of the Tribunal, alone could have permitted the department to substitute the sale price by the transaction value of the goods. Such is not the case in the present group of cases. We would, therefore, be well advised to clear such controversy. 13.When we find that the Assessing Officer did not have the basis for making additions, the question of percentage of the sales at which stage additions should be made would become redundant. 14. In the result, question is decided against the Revenue. All Tax Appeals are dismissed.” 4.In the result, these Tax Appeals are also dismissed. (AKIL KURESHI, J) JYOTI V. JANI (B.N. KARIA, J)