The Deputy Commissioner Of Income Tax (Central), Aaykar Bhawan,Central Revenue Building, Civil Lines, Raipur, Chhattisgarh v. M/S Abhishek Steel Industries Ltd., Mahamaya Tower, 3[Rd] & 4[Th] Floor, Infront Of Anupam Nagar, Near Varun Honda, G.e. Road, Raipur,Chhattisgarh

(Tax Case No.60/2022) 2025:CGHC:42527-DB Digitallysigned bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.08.2215:02:32+0530HIGH COURT OF CHHATTISGARH AT BILASPUR NAFR TAXC No. 60 of 2022 {Arising out of order dated 25-10-2021 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.253/RPR/2014} -(Assessment Year 201011) The Deputy Commissioner of Income Tax (Central), Aaykar Bhawan,Central Revenue Building, Civil Lines, Raipur, Chhattisgarh ... Appellant versus M/s Abhishek Steel Industries Ltd., Mahamaya Tower, 3[rd] & 4[th] Floor, Infront of Anupam Nagar, Near Varun Honda, G.E. Road, Raipur,Chhattisgarh ... Respondent For Appellant : Mr. Ajay Kumrani, Advocate on behalf of Mr. AmitChaudhari, Standing Counsel for the Income TaxDepartment. For Respondent : Mr. Sumit Nema, Senior Advocate with Mr. AnandDadariya, Advocate.Dadariya, Advocate. -Division Bench: Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sachin Singh Rajput, JJ. Judgment on Board(20/08/2025) 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 17-1-2023by formulating the following substantial question of law: -1961 (for short, ‘the IT Act’) was admitted for hearing on 17-1-2023by formulating the following substantial question of law: - (Tax Case No.60/2022) “1. Whether on the facts and in law, the ITAT was justified indeleting the addition of Rs. 11,68,88,700/- by the AO on theground that the assessee had suppressed its yield and hadindulged in unaccounted production and sales?” 2. The aforesaid question of law arises on the following factualbackdrop: - 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 conducted on21-6-2011, assessment was completed on 27-3-2014 and order waspassed under Section 153A read with Section 143(3) of the IT Act forthe assessment year 2010-11. The Assessing Officer has made anaddition on account of unaccounted sales based on an estimatedproduction yield of 89% in the assessee’s SMS Division. TheAssessing Officer adopted an estimated yield ratio and proceeded tocalculate alleged unaccounted production and consequential sales,resulting in substantial additions over multiple years. The AssessingOfficer has made addition of ₹ 11,68,88,700/- by recording followingfinding:- “9.7Thus based on the evidences found during the search andseizure action, following conclusions can be drawn: - (i) that in the SMS Division, there is wide variation in theconsumption of electricity vis-a-vis production of finishedgoods in different months of a year. (ii) that in the SMS Division, there is wide variation in theconsumption of Sponge Iron vis-a-vis production of finishedgoods in different months of a year. (iii) that in the SMS Division, there is no direct correlationbetween the consumption of raw material, electricity and (Tax Case No.60/2022) finished goods whereas, by and large the production process,the production set-up & the sources of raw material suppliesremain the same. (iv) that the figures of production and consumption of SMSdivision shown in the books of account of the assessee companydo not reflect its true state of affairs. (v) that in the Rolling Mill Division, there is wide variation inthe consumption of electricity vis-a-vis production of finishedgoods in different months of a year. (vi) that in the Rolling Mill Division, there is wide variation inthe consumption of furnace oil vis-a-vis production of finishedgoods in different months of a year. (vii) that in the Rolling Mill Division, there is variation in theconsumption of raw material vis-a-vis production of finishedgoods in different months. (Tax Case No.60/2022) finished goods whereas, by and large the production process,the production set-up & the sources of raw material suppliesremain the same. (iv) that the figures of production and consumption of SMSdivision shown in the books of account of the assessee companydo not reflect its true state of affairs. (v) that in the Rolling Mill Division, there is wide variation inthe consumption of electricity vis-a-vis production of finishedgoods in different months of a year. (vi) that in the Rolling Mill Division, there is wide variation inthe consumption of furnace oil vis-a-vis production of finishedgoods in different months of a year. (vii) that in the Rolling Mill Division, there is variation in theconsumption of raw material vis-a-vis production of finishedgoods in different months. (viii) that in the Rolling Mill Division, there is no directcorrelation between the consumption of raw material,electricity & furnace oil with the finished goods whereas, by andlarge the production process, the production set-up & thesources of raw material supplies remain the same. (ix) During search operation it was found that input of rawmaterial is not properly measured and burning loss reportedare based on estimation. The entry of the burning loss in thebooks of account is based on the information given by theproduction department, and the information available with theproduction department is based on estimation. (x) During physical verification of stock, excess stock totallingto Rs. 1,41,43,989/- was found out of which Rs. 57,21,115/- hasbeen admitted by the assessee. (xi) During F.Y. 2008-09 to 2010-11, the SMS Division showsyield which is quite low as compared to the yield being shownby other manufacturers of C.G.” 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 Income Tax(Appeals) and the CIT (Appeals) by order dated 21-7-2014 allowed (Tax Case No.60/2022) the appeal and set-aside the addition of unaccounted sales byrecording findings in paragraphs 9 to 9.60 of the appellate orderwhich the ITAT has summarised in its order (para 27.2) as under: - “(i) The AO has failed to establish the nexus between themathematical calculations of highest and lowest consumptionof power, sponge iron (raw material) etc. with yield of 89%adopted by the AO. (ii) The basis for arriving at the standard yield of 89% has notbeen disclosed despite repeated requests on behalf of theassessee. The CIT(A) himself attempted to work out the averageyield in the industry based on data available from thedepartment but failed to arrive at this so called standard figureof 89%. (iii) Comparison of yield declared by the other assesseeengaged in the similar line of business was carried out astabulated in para 9.4 of the first appellate order. On the basisof such comparison, arithmetical mean of yield stands at81.35% in respect of other parties vis-a-vis 83.94% shown bythe assessee. It was also found by the CIT(A) that yielddeclared by the different parties in the same year is not uniformand every party has declared a different yield. Likewise, thereis a wide variation in the yield of one year with another year inother cases as well. Not even a single comparable instance wasfound declaring yield of 89% adopted by the AO. The yieldachieved by the assessee is generally more than averageindustry yield. (iii) Comparison of yield declared by the other assesseeengaged in the similar line of business was carried out astabulated in para 9.4 of the first appellate order. On the basisof such comparison, arithmetical mean of yield stands at81.35% in respect of other parties vis-a-vis 83.94% shown bythe assessee. It was also found by the CIT(A) that yielddeclared by the different parties in the same year is not uniformand every party has declared a different yield. Likewise, thereis a wide variation in the yield of one year with another year inother cases as well. Not even a single comparable instance wasfound declaring yield of 89% adopted by the AO. The yieldachieved by the assessee is generally more than averageindustry yield. (iv) Financial results of the assessee as well as other partiesengaged in similar line of business was also compared asdiscussed in para 9.7 & para 9.8 of the order. On analysis offactual data tabulated in the first appellate order, it wasobserved that the gross profit & net profit declared by theassessee is stronger than its competitors despite marginallylower yield at some instances. It was thus noted by the CIT(A)that the percentage of yield cannot be said to be sole decisivefactor while assessing reliability of books of accounts andmerely low yield cannot lead to an indefeasible presumptionthat books of accounts of the assessee are unreliable and trueprofit earned by the assessee cannot be deduced therefrom. Inpara 9.9 of its order, the CIT(A) has made reference to theelaborate excise records maintained by the assessee and thereturns filed with the Central Excise Authority on monthly (Tax Case No.60/2022) basis and daily basis. On analysis of such records, it was foundto be tallying with the financial records. (v) The CIT(A) also took cognizance of the fact that capacityutilization in an industry depends on number of working daysand in the case of assessee where the production process formanufacturing of billets and blooms need to be shut downperiodically, the production operation consequently halts andeffect the yield. The CIT(A), thereafter, observed (para 9.37)that no infirmity in the details furnished by the assessee hasbeen found by the AO in this regard and AO has not broughtany adverse material on record. (vi) The statements of various witnesses were analyzed in para9.17 of the CIT(A) order and observed that the adverseinferences on such statement is totally misplaced. (vii) The AO has proceeded to estimate higher yield on the basisof mathematical and mechanical calculations. The AO has laidtoo much emphasis on statistics which cannot be said to havebeen gathered as a result of search alone. The statistics reliedupon by the AO are those which are quite routinely called foreven during the regular assessment proceedings under s.143(3)of the Act. The AO has not stated what according to him shouldhave been the average consumption of coal iron ore etc. (viii) From the statement of Shri Rishikesh Dixit recorded on21.06.2011, it was gathered that the aforesaid Director stated inclear terms that the quantity recorded in the loose slips tallieswith the quantity recorded in the regular books of accounts andexcise records. These loose slips are destroyed after it becomesredundant with the passage of time. The CIT(A) furtherobserved that neither in the show cause notice nor in theassessment order, there is any whisper of any such loose paperswhich bears the figure of production and which the appellantfailed to reconcile with the entries in the regular books ofaccounts and excise records/returns. (ix) The alleged low yield in comparison to benchmark of 89%adopted by the AO, the basis whereof is still in dark and notknown, cannot in itself provide a ground to reject the books ofaccounts without showing any defect in books by tangibleevidence. (ix) The alleged low yield in comparison to benchmark of 89%adopted by the AO, the basis whereof is still in dark and notknown, cannot in itself provide a ground to reject the books ofaccounts without showing any defect in books by tangibleevidence. (x) The AO has merely proceeded on the basis of suspicion andconjunctures. It is trite that suspicion howsoever strong cannottake place of proof. (Tax Case No.60/2022) (xi) The CIT(A) in para 9.22 onwards analyzed the decisionrendered by the co-ordinate bench in similar factual matrix tofind that addition on account of low yield as made by the AO isnot sustainable in law in the absence of tangible material.” 5. Questioning legality, validity and correctness of the order passed bythe CIT (Appeals) deleting the addition made by the AO, the Revenuepreferred an appeal before the ITAT and the learned ITAT concurredwith the findings of the CIT (Appeals) and dismissed the appeal bythe impugned order resulting into filing of appeal before this Court.the CIT (Appeals) deleting the addition made by the AO, the Revenuepreferred an appeal before the ITAT and the learned ITAT concurredwith the findings of the CIT (Appeals) and dismissed the appeal bythe impugned order resulting into filing of appeal before this Court. 6. Mr. Ajay Kumrani, Advocate, appearing on behalf of Mr. AmitChaudhari, learned Standing Counsel for the Income TaxDepartment i.e. the appellant herein/Revenue, would submit thatboth the authorities were absolutely unjustified in deleting theaddition of unaccounted sales based on an estimated productionyield of 89% which is based on the evidence available on record as aresult of search and seizure conducted and the assessment order hasrightly been passed under the provisions contained in Section 153Aread 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. Chaudhari, learned Standing Counsel for the Income TaxDepartment i.e. the appellant herein/Revenue, would submit thatboth the authorities were absolutely unjustified in deleting theaddition of unaccounted sales based on an estimated productionyield of 89% which is based on the evidence available on record as aresult of search and seizure conducted and the assessment order hasrightly been passed under the provisions contained in Section 153Aread 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 therespondent herein/assessee, would support the impugned orderspassed by the CIT (Appeals) and the ITAT and submit that theaforesaid findings recorded by the two authorities deleting theaddition of ₹ 11,68,88,700/- were made only on the basis ofsuspicion which was totally impermissible in law in light of therespondent herein/assessee, would support the impugned orderspassed by the CIT (Appeals) and the ITAT and submit that theaforesaid findings recorded by the two authorities deleting theaddition of ₹ 11,68,88,700/- were made only on the basis ofsuspicion which was totally impermissible in law in light of the (Tax Case No.60/2022) decision of the Supreme Court in the matter of Dhakeswari Cotton Mills Limited v. Commissioner of Income Tax, WestBengal1. Therefore, the aforesaid findings are totally findings of factand there is no demonstrable perversity or error apparent on the faceof record cited by the appellant/Revenue warranting interference bythis Court. As such, the findings with regard to unaccounted salesbased on estimated production yield have rightly been set-aside bythe CIT (Appeals) which has rightly been affirmed by the ITAT andtherefore the present appeal deserves to be dismissed. (Tax Case No.60/2022) decision of the Supreme Court in the matter of Dhakeswari Cotton Mills Limited v. Commissioner of Income Tax, WestBengal1. Therefore, the aforesaid findings are totally findings of factand there is no demonstrable perversity or error apparent on the faceof record cited by the appellant/Revenue warranting interference bythis Court. As such, the findings with regard to unaccounted salesbased on estimated production yield have rightly been set-aside bythe CIT (Appeals) which has rightly been affirmed by the ITAT andtherefore the present appeal deserves 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, made anaddition of ₹ 11,68,88,700/- on account of alleged unaccounted salesbased on an estimated production yield of 89% in the Steel MeltingShop (SMS) Division of the assessee. However, for the reasonsmentioned above, finding that the Assessing Officer has proceededon the basis of suspicion and conjectures, the CIT (Appeals) has set-aside that addition which the ITAT has concurred with by holding asunder: -addition of ₹ 11,68,88,700/- on account of alleged unaccounted salesbased on an estimated production yield of 89% in the Steel MeltingShop (SMS) Division of the assessee. However, for the reasonsmentioned above, finding that the Assessing Officer has proceededon the basis of suspicion and conjectures, the CIT (Appeals) has set-aside that addition which the ITAT has concurred with by holding asunder: - “27.3 Significantly, in para 9.2 of the first appellate order, theCIT(A) noted while the AO has made discussions onmathematical calculations pertaining rolling material division,the additions have been made towards low yield in SMSDivision.CIT(A) noted while the AO has made discussions onmathematical calculations pertaining rolling material division,the additions have been made towards low yield in SMSDivision. (Tax Case No.60/2022) 27.4In conclusion, the CIT(A) observed that assessee hasfurnished explanation on all the documents seized during thecourse of search and the explanation of the assessee were testchecked with reference to seized material, books of accounts,bills/invoices and other evidences and found to be satisfactory.It was further noted that the AO has not pointed out anyinfirmity in the explanation of the Assessee. 27.5The CIT(A) in our mind has analysed the factual matrixthreadbare. Without repeating all the observations of theCIT(A), we find ourselves in complete agreement with theconclusion drawn by the CIT(A). The CIT(A) has objectivelyanalyzed the factual situation and found complete absence ofany adverse material against the assessee which can supportthe allegation of the AO towards unaccounted productionpresumed on the basis of alleged low yield declared by theassessee. On facts, the CIT(A) has found that the yield declaredby the assessee is neither low nor the book results could beimpeached by some tangible material to indulge in rejection ofbooks of accounts. We see no discernible error whatsoever inthe process of reasoning adopted by the CIT(A) while reversingthe totally untenable action of the AO based on extraneousconsiderations. 27.6Significantly, it is also pertinent here to note thatidentical issue cropped in the case of a group co. ( MahamayaSteel Industries Ltd.) in the same search and engaged in thesame business. The standard yield of 89% adopted in that casewas set aside by the CIT(A) and book results were accepted inthe identical factual matrix. The Revenue challenged thereversal of additions on account of lower yield. The Co-ordinate bench in DCIT vs. Mahamaya Steel Industries Ltd.ITA No. 232-235/RPR/2014 order dated 7/11/2019 instrikingly similar factual matrix involving same issue andarising from same search, endorsed the order of CIT(A) inrelation to AY 2009-10-2013 and struck down the additionsmade by the AO. Hence, the issue, in any case, is not resintegra any more in the light of decision of the co-ordinatebench.” 10. However, at this stage, it would be appropriate to notice the decision of the Supreme Court in Dhakeswari Cotton Mills Limited (supra) in which their Lordships of the Constitution Bench of theSupreme Court dealing with the jurisdiction while making order (Tax Case No.60/2022) under Section 23(3) of the Income Tax Act, 1922 and alsoconsidering 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 entitled tomake a pure guess and make an assessment without reference to anyevidence 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 says thatthe Income Tax Officer is not fettered by technical rules ofevidence 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) of Section23 of the Act, the Income Tax Officer is not entitled to make apure guess and make an assessment without reference to anyevidence or any material at all. There must be something morethan bare suspicion to support the assessment under Section23(3). The rule of law on this subject has, in our opinion, beenfairly and rightly stated by the Lahore High Court in GurmukhSingh 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 Supreme Courtin Dhakeswari Cotton Mills Limited (supra), it is quite vividthat the CIT(Appeals) and the ITAT, both, after objectively analysingthe factual situation, found complete absence of any adverse materialagainst the assessee which can support the allegation of the AOtowards unaccounted production presumed on the basis of allegedlow yield declared by the assessee. Thus, in complete absence of anyadverse material, both the authorities have concurrently reached to 21944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah) (Tax Case No.60/2022) 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 Supreme Courtin Dhakeswari Cotton Mills Limited (supra), it is quite vividthat the CIT(Appeals) and the ITAT, both, after objectively analysingthe factual situation, found complete absence of any adverse materialagainst the assessee which can support the allegation of the AOtowards unaccounted production presumed on the basis of allegedlow yield declared by the assessee. Thus, in complete absence of anyadverse material, both the authorities have concurrently reached to 21944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah) (Tax Case No.60/2022) the conclusion that the addition made by the AO is baseless andwithout any evidence, therefore, the rejection of books of accounts isinvalid and addition made by the AO on account of allegedsuppression of yield is based upon mere guess work. It was furtherheld by the two authorities that the yield declared by the assessee isneither low nor the books maintained by the assessee could beimpeached by some tangible evidence/material on record andtherefore the ITAT has rightly confirmed the order of the CIT(Appeals) and proceeded to dismiss the appeal filed by the Revenue.In our considered opinion, the concurrent finding recorded by thetwo authorities holding that the addition made by the AssessingOfficer for the assessment year 2010-11 is baseless and without anyevidence/material, is a pure and simple finding of fact based on theevidence available on record, which is neither perverse nor contraryto the record. Accordingly, we proceed to dismiss the appeal and thesubstantial question of law is answered in favour of the assessee andagainst the Revenue. 12. In the result, the appeal stands dismissed leaving the parties to bear their own cost(s). Sd/- Sd/-(Sanjay K. Agrawal)(Sachin Singh Rajput)JudgeJudge