Unaccounted Sales Addition Based on 89% Estimated Yield Found Unsustainable without Evidence: Chhattisgarh HC dismisses Revenue’s Appeal [Read Order]
The Court concluded that both the CIT(A) and ITAT had objectively analyzed the factual matrix and found a complete absence of adverse evidence against the assessee. Accordingly, no interference is required.
Chhattisgarh - Highcourt - TAxscan
Chhattisgarh - Highcourt - TAxscan
The Chhattisgarh High Court has dismissed the Revenue’s appeal ruling that additions made on account of alleged unaccounted sales based on an 89% estimated yield were unsustainable in the absence of tangible evidence.
The Division Bench of Justices Sanjay K. Agrawal and Sachin Singh Rajput upheld the concurrent findings of the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT), both of which had set aside the Assessing Officer’s (AO) order.
A search conducted on the assessee, Abhishek Steel Industries Ltd’s premises in June 2011, following which the AO completed assessment under Section 153A read with Section 143(3) of the Income Tax Act, 1961, for AY 2010-11.
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The AO alleged suppression of yield in the Steel Melting Shop (SMS) Division and made an addition of ₹11.68 crore, estimating production at a standard yield of 89%. The basis of this benchmark, however, was neither disclosed nor substantiated with concrete material.
On appeal, the CIT(A) found that the AO had relied heavily on mathematical assumptions and comparative statistics without demonstrating any direct nexus between raw material consumption, electricity usage, and output.
The appellate authority observed that the industry average yield worked out to around 81.35%, whereas the assessee had declared a yield of 83.94%, which was above the average. It also noted that profits declared by the assessee were stronger than competitors despite minor variations in yield, and the excise records reconciled with the books of accounts.
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Further, the revenue appealed before the tribunal, however, ITAT affirmed the reasoning of the CIT(A) , adding that the AO’s action was based on suspicion and conjecture rather than proof.
The Court rejected this contentions of the income tax department, stating the Supreme Court’s ruling in Dhakeswari Cotton Mills Ltd. v. CIT, which prohibits assessments based on pure guesswork without supporting evidence.
The Court concluded that both the CIT(A) and ITAT had objectively analyzed the factual matrix and found a complete absence of adverse evidence against the assessee. Since the yield declared by the assessee was in line with industry trends and properly backed by statutory excise records, the addition of ₹11.68 crore was rightly deleted.
While dismissing the Revenue’s appeal, the high court confirmed that the findings were factual in nature, not perverse, and required no interference.
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