The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that addition under VAT is not sustainable when the charges of clandestine removal cannot be confirmed without corroborative evidence.
The Revenue challenged the orders dated 10.01.2017 & 23.01.2017 passed by the Commissioner of Income Tax (Appeals) – 2, Ahmedabad ( ‘the CIT(A)’) which deletes the addition of Rs.1,33,61,517/- made on account of suppression of sales.
M/s. Crystal Glaze, the assessee filed the return under Section 143(3) of the Act dated 27.10.2007 declaring total income at Rs. Nil upon allowing set off of carried forward depreciation. Subsequently, under Section 143(3) r.w.s. 147 of the Act, the Ld. ITO on 27.03.2014 determined the total income at Rs.2,11,40,325/-.
The reopening was made based on information received by the Directorate General of Central Excise (Intelligence), Ahmedabad, where it has been stated to be a fact of the assessee indulged in evasion of Excise Duty by misdeclaration of the maximum retail price of ceramics manufactured by it. The assessee since found to be concealed the particulars of income, the reopening under Section 147 of the Act was made. Despite several requests, the assessee did not furnish the details of goods cleared by it during the period from 01.04.2006 to 31.03.2007.
The income concealed by the assessee was worked out on the gross profit percentage to the total turnover for the F.Y. 2006-07, where the assessee has a gross profit ratio of 18.97% of the total turnover. Furthermore, suppression of sales was found to be Rs.7,04,34,989/- and applying the GP rate at 18.97% Rs.1,33,61,517/- was added to the total income of the assessee, which was, in turn, deleted by the CIT(A), on the premise that reopening has been made based on the show cause notice issued by the Excise Authority which has culminated into the final order.
The Tribunal considered the Co-ordinate Bench in the case of Zirconia Cera Tech Glazes vs. DCIT (supra) wherein “addition was made only on basis of show cause notice issued by Excise Department against assessee alleging that assessee was engaged in undervaluation of sales and clandestine removal of goods and revenue had brought nothing on record that it had applied its mind over and above contents of said show cause notice and further, in excise proceedings, CESTAT had decided the issue in favour of assessee, impugned addition was unjustified.”
Relying upon the above-said judgement, a Coram comprising of Shri Pramod M Jagtap, Vice President & Ms Madhumita Roy, Judicial Member “the order passed by the CIT(A) in deleting the addition holding reopening based on the show cause issued by Excise Department not justified is just and proper to warrant interference.” The appeal for the revenue got dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates.
