Income Tax Appellate Tribunal – Raipur
D.C.I.T. Central Cricle,, Raipur vs Mahamaya Steel Industries Ltd, … on 21 October, 2021 IN THE INCOME TAX APPELLATE TRIBUNAL
“RAIPUR” BENCH, RAIPUR
BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
& SHRI N. K. CHOUDHRY, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No. 62/RPR/2018)
( नधा रण वष / Assessment Year : 2013-14)
Asstt. Commissioner of बनाम/ Mahamaya Steel
Income tax (Central)-2 Vs. Industries Ltd.
Central Revenue Building, B-8 & 9, Sector-C, Urla
Civil Lines, Raipur (C.G.) – Industrial Area, Sarona,
492001 Raipur (C.G.)
था यी ले खा सं ./जी आ इ आर सं . / P AN/ GI R No . : A AB C R0 6 9 5 Q
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से /Appellant by : Shri P. K. Mishra, CIT.DR
यथ क ओर से/Respondent by : Shri Veekaas S Sharma, A.R.
सन
ु वाई क तार ख / Date of
02/08/2021
Hearing
घोषणा क तार ख /Date of
21/10/2021
Pronouncement
आदे श/O R D E R
PER PRADIP KUMAR KEDIA – AM:
The captioned appeal has been filed at the instance of the
Revenue against the order of the Commissioner of Income
Tax(Appeals)-II, Raipur (‘CIT(A)’ in short), dated 02.02.2018
arising in the assessment order dated 30.03.2016 passed by the
Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961
(the Act) concerning AY 2013-14
2. The grounds of appeal raised by Revenue read hereunder:
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 2 –
“1. “On the facts and in t he circumstances of the case the Ld. CI T(A)
erred in not appreciat ing that there existed incriminating seized
material which s howed that the assessee company has indulged
in unaccounted production by suppressing its yield, particularly
in Steel Melting Shop(SMS). ”
2. “On the facts and i n the circumstances of the case the Ld.
CIT(Appeal ) erred in not appreciating that t he books of accounts
are not reliable in view of the evidence seiz ed during the course
of search reflecting suppression of product ion yield. Therefore
when there is no change in the business and the modus operandi
the CIT(A) ought to have accepted 89 % as the yield also.
3. “On the facts and i n the circumstances of the case the Ld.
CIT(Appeal ) erred in deleting the disallowance made by the AO
u/s.14A of Rs.11,61,305/- particularly when the assessee did not
discharge the onus to prove that the interest expenditure claimed
was out of own inter est bearing funds or non-interest bearing
fund, even if it has suf ficient cash profit.”
3. Ground nos. 1 & 2 concern addition on account of lower yield
of production compared to industrial average.
4. Briefly stated, the assessee is engaged in the manufacturing of
re-rolled products such as heavy steel structures, joist, ingots,
girders etc. It has two divisions namely Furnace division which is
also known as Steel Melting Shop (SMS) and Rolling Mill Division
(RMD). Furnace/SMS division uses sponge iron, pig iron, scrap and
end cutting (end cutting is basically output of RMD) as raw material
to manufacture billets and blooms and the RMD Divisions uses
these billets and blooms as raw material to produce further re-rolled
products such as heavy steel structural etc.
4.1 A search operation was carried out in the case of assessee on
17.10.2011 at the main office and the factory premises of the
assessee company. Consequently, the assessment of A.Y. 2012-13
and preceding six years were subjected to search assessment
proceedings. In the search assessment, the AO rejected the books of
accounts of the assessee and alleged that the assessee company has
suppressed its yield of SMS/Furnace division. The AO assumed the
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 3 –
average yield of the industry at 89% in the SMS/ Furnace division
and consequently, the difference between actual yield shown by the
assessee vis-à-vis standard yield of 89% assumed by the AO was
treated as unaccounted production/unrecorded sales in those years.
In the first appeal against the search assessment, the additions on
account of alleged lower yield of production declared was deleted
and reversed. The Revenue preferred appeal against the aforesaid
first appellate order. However, the co-ordinate bench of Tribunal
also did not see any merit in such additions towards lower yield
made by AO in ITA Nos. 232 to 235/RPR/2014 order dated
07.11.2019 concerning AYs. 2009-10 to 2012-13.
4.2 The present appeal in question relates to A.Y. 2013-14 which
is subsequent to the year covered in the search assessment
proceedings. It is noticed that the additions have been made by the
AO in the instant case in the same manner by comparing yield
declared by the assessee in SMS/ Furnace division with the average
industry yield of 89% assumed by the AO and for this purpose the
AO has referred to the conclusion drawn by his predecessor AO in
search assessment completed in relevant to A.Y. 2006-07 to 2012-13
wherein also the similar additions were made on account of alleged
suppression of yield. The AO has simply continued with the
additions towards lower yield as shown in the search assessment on
the ground that the deletion of addition in first appellate order in
those years have not been agreed by the department and an appeal
has been preferred against the first appellate order before the ITAT
which is pending for adjudication.
5. Aggrieved by the additions made towards lower yield, the
assessee preferred appeal before the CIT(A). The CIT(A), after
taking note of attendant facts and circumstances, deleted the
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 4 –
additions so made for which the concluding operative para is
reproduced for ready reference:
“I have considered t he grounds of appeal, gone through the
order of the AO and seen the submissions of t he appellant as well as the
remand report of the AO and comments of t he appellant on the remand
report. I observe that the AO has rejected t he books of accounts of the
appellant u/s 145 of the Act and doing so the AO has mentioned that the
GP rate of the appellant has gone down dr astically as compared to the
preceding years and the appellant has not satisfactorily explained the
reasons for decline in the GP and NP rates. The AO further stated that
the yield declared by the appellant in st eel melting shop i.e. SMS
division is nearly 85% which is much bel ow the average yield in the
last 7 assessment year taken by 85 % which is much below the average
yield in the last 7 assessment years taken by the erstwhile AO and
thereafter the AO cal culated the amount of suppression in production
and sales by taking the yield of 89 % and worked out the amount of
suppression in sales and an income and made additi on of
Rs.19,09,67,165/-. The AO further stated t hat the basis for adopting
yield of 89 % has been discussed at length in the assess ment or der for
the AYs 2006-07 to 2012-13 and that appeal has been preferred before
the ITAT against the order passed by my ld. Predecess or in the
appellant’s own case.
10 Vide this office letter dated 07.12.2017 in F.No.CIT(A)-
II/RPR/Appeal Proceed/2017-18 dated 07.12.2007 and the AO was
asked to explain the basis behind adoption of yield at 89%. Vide her
letter dated 21.12.2017 the AO enclosed t he assessment order of the
appellant for the AY 2006-07 to 2012-13 and relied upon the findings
and conclusions by her predecessor in the search asses sment
proceedings completed in the case of the appellant. I also obser ve that
the addition made in the assessment by adopting 89 % yield in the SMS
division stands deleted by my ld. Predecess or in his order. As regards
decline in GP rate the appellant contended that the iron and steel
sector had been going through a challengi ng phase owing to sl uggish
domestic demand and constraints of iron ore supply along with rise in
steep rising iron or prices. It will brought to my notice that the cost
power in SMS division has increased by nearly 56 % in comparison to
the FY 2009-10 and in the case of Rolling Mill Division it has
increased by nearly 52 %. My attention was also invited to the increase
in cost of raw material and inputs in the Rolling Mill Division such as
blooms and billets as well as the increase i n the cost of inputs of SMS
division.
I observe that the AO has made the addition by estimating the yield at
89 % of the total raw material consumed in the SMS division after
rejecting the books of accounts of the appellant. The only reason for
rejection of books of accounts adduced by t he AO is that the appellant
had declared yield in the SMS division less than 89 %. In the opini on of
the AO as can be seen, the yield of the appellant company should have
been same in all the years as the nature of the business is the same as
it was during the peri od covered under the search proceedings. I n the
assessment order the AO has not brought on record any irregularity on
defect in the books of accounts bills and vouchers and other
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 5 –
documentary evidences pertaining to year under consideration. What
can be noticed from t he assessment order i s that the AO has bas ed his
assessment on the outcome of the assess ment proceedings for the search
period covered during action u/s 132 of the Act and extended the same
to the impugned asses sment year i.e. 2013- 14 which is my opinion had
no bearing for the ass essment proceedings f or the improved AY.
There is no merit in the contention of the AO that the conclusions
drawn in the search assessment proceedings are enhancement made,
which in fact were del eted, can be made basis for assessing the i ncome
of other subsequent years without considering in facts and
circumstances of earl ier years are the year in question. Each year
assessment is a separ ate assessment which attains finality for the area
unless disturbed by cogent facts and materials and does not govern
later years. The facts and circumstances of each year are to be
considered separately and must find reference in the assessments
completed.
11. I further observe that the books of accounts of the appellant was
subject to tax audit and since the appellant is dealing exci sable
products it has filed excise returns on mont hly basis as well as the VAT
returns as per sales tax laws. The evidence of which were produced
before the AO who examined the same including the bills and vouchers.
With a view to bring on record the basis behind adoption of yield at
89 % the AO was asked to convey the bases for doing so. From the
remand report of the AO I find that reliance has been placed by her on
the assessment order passed u/s 153A r.w.s. 143(3) for the search
period i.e. AY 2006-07 to 2012-13. Importantly even in the assessment
order pertaining to search period there is no reference of any seized
material or any other documentary evidences to establish the fact that
the appellant had indulged in unaccounted production and unaccounted
sales. The additions were made mainly on the pretext that the average
yield in the industry is it nearly 89 % and the yield declared by the
appellant is low as compared to the yield shown by other manufact urers
of Chhattisgarh. Ther e could be several reasons for variation of GP
and NP but the variat ion per se is not sufficient to draw an inference
that the books of accounts are liable to be rejected u/s 145 until and
unless specific defect or irregularity are pointed out and brought on
record pertaining to t he books of accounts of the appellant.
12. I have seen the appellate order in A.No.718 to 722 for AY 2008-
09 to 2012-13 for my ld. predecess or who has adjudicated the s earch
assessment of the appellant for all the years and deleted the additions
made. It is fruitful to r eproduce his observation as under:
It is seen that A.O has not pointed out any suppression of
production based on any cogent and incriminating material
against the appellant. Material showing financial nexus can only
be a valid basis for holding suspicion or making the addition.
Unfortunately, not a single document showing any financial
dealings by the appellant has been referr ed to either in the
assessment order , or even during the cours e of hearing, des pite
the liberty granted vi de this office Letters on 28.04.2014 and
16.05.20214. The facts and circumstances of the present case
reveal that the A.O just brushed aside the objections/submissions
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 6 –
and contentions raised by the appellant and evidences placed on
record. The A.O has made mechanical addi tion of the difference
between the unaccounted production/sales worked out on the
basis of 89 % yield s uspected by the A.O that must have been
achieved by the appellant. The A.O. has not brought any material
on record to disbelieve the book result s hown by the appellant. If
there is no suppression of material facts, the authority cannot
embark upon a s peculative assessment of national profits. The
assessment should be based on cogent facts and there should be
no vindictiveness or arbitrariness in passing the assess ment
order. The estimated addition made by the A.O do not bear any
relationship with the s pecific defect in books of accounts and the
A.O cannot be permitted to make arbitrary addition. The care
thing to be seen is the evidence found which will be the basis for
making the assessment. Coming to the facts of the case, the AO
estimated the unaccounted production and sales on benchmark
yield of 89% in cas e of SMS Division. The entire estimated
suppressed sales has been treated as profit. I am convinced that
the determination of undisclosed income in this case is merely on
the basis of presumption and an on estimate basis. Search
assessment has to be f ramed on the basis of some material, which
in this case is raw material consumed i n SMS Division for
manufacturing of bl ooms and billets in furnace. No other
materials or asset details were found during the course of
search. On the contr ary, the appellant had provided all the
requisite details regarding its production activity. The items of
raw material purchas ed are excisable products, the quantity of
raw material purchased as mention in Excis able and Commercial
invoice was test checked with the entries i n the Excise Record
for row material i.e. RG-1 and the same was found to be in
order. The quantity appearing in the Excise Registers was cr oss
checked with the entri es in the Excise Retur ns and the same was
found to be in order and tallying with the excise Records. The
inventory appearing i n the Excise Records and Excise Returns
was found to be the same as in financial records i.e. the books of
accounts and audited financial statements. Undisputedly, the
production was meticulously routed through the appellant’s daily
production register/ Excise Records. The entries therein were
definitely co-relatable to the entries in the stock register,
enabling on easy stock tally, if one was so required. However,
the AO did not deem it fit to carry out the exercise of tallying the
stock as per these ent ries in the two types of books. He merely
went by the alleged suppressed yield. Various submissions
regarding reas ons f or variation in consumption of power,
furnace oil, yield etc were duly furnished by the appellant. The
appellant did furnis h the comparable i nstances and also
demonstrated with technical details of production. These copious
evidences were wrongly ignored by the AO. Commissioner of
Income Tax vs . Hindustan Tin Work Ltd. (2007) 291 ITR 290
(Del ) : (2007) 164 TAXMAN 529.
13. From the above observations of my ld. Predecessor was
adjudicated the search assessments for the relevant assessment years
converted in action u/s 132 there was no sei zed material leading to the
conclusion that the appellant has suppressed the yield and hence
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 7 –
adoption of 89 % yield is justified. When there is no material for
adopting 89 % even during the search assess ments there is no basi s for
relying on the assess ments in adapting 89% yield for the AY 2013-14. I
also observed that in the appellate order my ld predecessor has
tabulated comparable instances of GP and NP of industry average
wherein the GP and NP of the appellant is much higher than the others.
The case laws related upon in the appellat e order of my predecessor
some of which are reproduced as under ar e relevant to the facts in
question.
(a) ACIT vs . M/s Balajee Structurals (I ) Pvt. Lt d. (supra), the
jurisdictional Bench Hon’ble ITAT;
(b) ACIT vs M/s Super Ir on & Steel Pvt. Ltd., ITA No.139 to
141/BLPR2010;
(c) Lalchand Bhagat Ambi ca Ram vs. CIT: (1959) 37 ITR 288;
(d) Income Tax Officer vs . W.D. Estae P. Ltd. (1993) 46 TTJ
(Bom) 143 : 45 I TD 473;
(e) Commissioner of Income Tax vs. Discovery Estates Pvt.
Ltd. (2013) 356 ITR 159 (Delhi );
(f ) Mangilal Rameshwarlal Soni (HUF) vs. Assistant
Commissioner of Income Tax (2004) 83 TTJ (Jd) 770 :
(2004) 4 SOT 680 (Jd);
(g) Bansal Strips (P) Ltd & Ors . vs. Assistant Commissioner
of Income Tax (2006) 100 TTJ (Del) 665 : (2006) 99 ITD
(Del ) by the Hon’ble I TAT, Delhi “A” Bench;
(h) Dhakeswari Cotton Mills Ltd. vs. Commissioner of Income
tax (1954) 26 ITR 775 (SC);
14. In totality of the facts discussed above I find no basis for
adopting 89 % yield and hence the additi on of Rs .19,09,67,165/- is
deleted and grounds No. 2 & 3 are allowed.”
6. Aggrieved by the relief granted by the CIT(A), the Revenue is
in appeal before the Tribunal.
7. When the matter was called for hearing, the learned DR for
the Revenue relied upon the observations made by the AO in the
assessment order.
8. Per contra, learned counsel for the assessee placed reliance
upon the findings in the order of the CIT(A). The learned counsel
further submitted that issue is squarely covered in favour of the
assessee by the order of the co-ordinate bench of Tribunal in the
case of the assessee for A.Y. 2009-10 to 2012-13 in ITA Nos. 232 to
235/RPR/2014 order dated 07.11.2019. The learned counsel
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 8 –
submitted that the issue being only a continuation of the old
controversy without any factual deviation, the conclusion already
arrived at by the co-ordinate bench on the subject in issue requires
to be followed.
9. We have carefully considered the rival submissions and
perused the orders of the authorities below as well as material
placed before us by way of paper book referred to and relied upon at
the time of hearing. We observe that the basis of additions towards
lower yield of production by the assessee in its SMS/Furnace
division is on account of comparison with average industry yield of
89% assumed by the AO. Significantly, in this regard, we observe
that the CIT(A), on objection raised by the assessee to such
presumed yield, wrote letter dated 07.12.2017 to the AO for the
purposes of understanding the basis behind adoption of yield at
89%. The AO, however, vide letter dated 22.12.2017 merely
enclosed the assessment order for AY 2006-07 to 2012-13 for the
purposes of adopting such standard yield. It is evident that the AO
in the instant case has merely proceeded on the findings arrived at
by the AO in A.Y. 2006-07 to 2012-13. At this stage, it would be
pertinent to take note of decision of the co-ordinate bench
concerning A.Ys. 2009-10 to 2012-13 on the 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
facts emerging on record, found substantial merit in the decision
rendered by the CIT(A) in those years and thus endorsed the action
of the CIT(A) in deleting such additions on account of lower yield.
The relevant operative para of the order of the ITAT is reproduced
here for ready reference:
“8. We have perused t he case records and heard the rival content ions.
We have also analyzed the judicial pronouncements placed before us.
The facts on records clearly demonstrates that the Assessing Officer
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 9 –
has failed to bring any cogent reasons/evidences for making additi on in
the case of the as sessee. He has arrived at various mathematical
calculations and has derived the yield at 89 %. All these were done by
the Assessing Officer without bringing on r ecord any single document
which indicates that the assessee has s uppressed its yield or has
indulged in any unaccounted sales. It is als o on r ecord that though the
Assessing Officer has estimated production at 89 % in SMS division and
had made various mathematical calculations at Pages 7 to 11 of the
assessment order regarding Rolling Mill Division, however, it is seen
from the assessment order that the Assessing Officer has not drawn any
adverse inference as regards Rolling Mill Division and nor did the
Assessing Officer find yield of Rolling Mill Division to be lower . The
Assessing Officer has not substantiated the relevance and signifi cance
of these mathematical calculations pertaining to Rolling Mill Divis ion.
8.1 We further observe that the Ld. CIT(A) on his own conducted
specific enquiry in order to find out the percentage of yield declared by
the other assessee engaged in si milar line of business. It is noted from
such comparison that the yield declared by the different assessees in
the same year is not uniform, conversely every assessee declared
different yield. Not even a single comparable instance was found
declaring yield of 89%. That further, action of the Assessing Off icer in
rejecting the books of accounts merely due to the reason that the yield
achieved by the assessee is less than the yield percentage i.e.89 %
which has not been achieved even by other assessees engaged in similar
line of business. The Assessing Officer has not brought on recor d the
manner in which he has worked out yield of 89 % in SMS Division.
9. In the case of M/s. Ram esh Steel Industr ies Vs. DCI T-1(1), Raipur,
ITA No.48 of 2015, t he Hon’ble Chhattisgarh High Court has hel d and
observed that “the power of the Assessing Officer under Section 145(3)
is not absolute but was regulated and circumscribed by stat utory
provisions.” That furt her “power consumption in an industry may vary
for various reasons. Under Section 145(3) of the Income Tax Act, the
jurisdiction of the Ass essing Officer arises i f he was not satisfied about
the correctness of the accounts of the as sess ee. However, the Assessing
Officer should give specific reasons for rejecting books of account s.”
10. In the instant cas e, the Assessing Officer calculated yield of 89 %
and has also calculated consumption of power and difference thereto
pertaining to production and has held that the books of accounts are
therefore not reliable and rejected the books of account while res orting
to Section 145(3) of t he Act. As per the legal principles laid down by
the Hon’ble Chhattisgarh High Court (supr a.) that this power is not
unfettered and it has to be used judicially by giving specific reasons
which in the instant case, the Assessing Officer has not complied wi th.
11. In the case of ACIT-1(1), Raipur Vs. Siyaram Rice Mill in ITA
No.59/ BLPR/2011, the Raipur Bench of the Tribunal has observed that
“in a case where the Assessing Officer had applied a mathematical
formula and made addition but however , rej ected all the submissions of
the assessee without passing speaking or reasoned order”. The Raipur
Bench of the Tribunal further held that regarding mathematical
calculation, the Assessing Officer has not referred to any comparable
cases that could prove that the stand taken by him was bas ed on
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 10 –
scientific and logical basis. That further “a reasoned order cannot be
passed without consi dering the reply of the assessee filed by the
assessee and without giving reasons as to why the reply was not
acceptable.”
12. In the instant case, the Ld. CIT(A) had made exercise to bring out
the percentage of yi eld declared by the other assessee engaged in
similar line of busines s and nowhere the yield was 89 %. The Assessing
Officer also gave no basis for its calculation of the yield at 89 %. There
was no scientific or logical basis in the exercise conducted by the
Assessing Officer. The submissions made by the assessee, were also
summarily rejected by the Assessing Officer which is therefore, not in
accordance with judi cial principle as herein above enshrined in the
various judicial pronouncements. We have also observed in the case of
ACIT-1(1) Raipur Vs. Ram esh Steel Industries in ITA
No.95/ BLPR/2011, the Assessing Officer made addition as he noted
that in the year under appeal, the assessee had consumed more units of
power as compared to the last two asses sment years. The Tri bunal
observed that “consumption of power in i tself is not an evidence to
prove or disprove the production of finished goods.” We further observe
that in the case of St. Teressa’s Oil Mill (761 I TR 365) and Sulabh
Marbles (P.) Ltd. (205 CTR 464) decided by the Hon’ble Kerala and
Rajasthan High Court has held that “disparity in electricity
consumption cannot be the criteria for rejection of accounts and for
making ad-hoc additions. The assessee had maintained regular books of
account and the Assessing Officer had not come across any
unaccounted purchase or suppressed sale. In these circumstances, only
on the basis of power consumption, no addition could be or sustai ned.”
13. It is apparent from the records that the Assessing Officer has not
brought on record any evidence stating lower or suppression of sales by
the assessee. He tried to support his cas e by showing deficiency in
power consumption by the assessee. But the Hon’ble High Courts have
held without any di rect corroborative evidences on low yield or
suppressed sales, the disparity of power consumption cannot be the sole
ground or reason for making addition by the Assessing Officer.
14. In view of the aforesaid examination of facts and judicial
pronouncements, we find the order of the Ld. CIT(A) is absolutely
correct and therefore, the same does not call for any interference.
Thus, ground relating to “issue of the lower yield declared by the
assessee” in all the appeals for all the ass essm ent years are therefore
dismissed.”
10. In the light of the view taken by the co-ordinate bench in the
case of assessee in earlier assessment years, the issue is no longer
res integra. It is evident that issue is squarely covered by the
decision of the co-ordinate bench in assessee’s own case for AYs.
2009-10 to 2012-13 wherein also the appeal of the Revenue was
dismissed after elaborate discussion on factual and legal matrix.
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 11 –
The Revenue could not bring any cogent reason to take a departure
from the earlier view. Thus, in consonance with the view expressed
earlier, we do not see any merit in the plea of the Revenue for
restoration of the additions deleted by the CIT(A) on this score.
11. In the result, Ground Nos. 1 & 2 of the Revenue’s appeal
towards alleged lower yield of production is dismissed.
12. Next ground concerns disallowance under s.14A of the Act.
The additions made by resorting to Section 14A of the Act were
deleted by the CIT(A) on the following reasonings:
“19. I have considered the grounds of appeal, perused the assessment
order of the assessing officer and gone though the submissions made by
the appellant. I obs erve that the appell ant has claimed that no
expenditure was incurred in relation to exempt income and that the
investments were made in the preceding years and not during the year
under consideration. The appellant has claimed that the cash profits
earned by the appellant in the year in which the investments wer e made
in the shares of group companies was more than the amount of
investment in shares.
The details of cash profits earned by the appellant and amount of
investment made in shares is reproduced her e under:
Particulars 31.03.2006 31.03.2009 31.03.2010 31.03.2011 31.03.2012 31.03.2013
PBT 770.52 1329.26 1336.16 1572.94 1119.26 289.27
Less:
Current Tax 0.00 137.00 228.04 357.79 272.30 69.41
Less: Income tax
related to
previous
year 0.00 0.87 15.00 0.18 -0.02 7.73
Less: Fringe
benefit tax 1.12 1.90 0.00 0.00 0.00 0.00
PAT 769.40 1189.49 1093.12 1214.97 846.98 212.13
Add:
Depreciation 161.78 328.26 865.20 731.82 542.46 527.22
Cash Profit 931.18 1517.75 1958.32 1946.79 1389.44 739.35
Table Showing Pr opor tion of Investment to Cash Pr ofit earned by the
assessee during the F.Y in which investments were made
Cash Profit during the
Investment Investment to Cash Profit
F.Y year
(Rs.in Lacs) Ratio(%)
(Rs. in Lacs)
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 12 –
2005-06 30.01 931.18 3.22
2008-09 200.00 1517.75 13.17
2010-11 10.00 1946.79 0.51
2012-13 282.00 739.35 38.14
On going thr ough the above submissions and details of cash profits
earned in the respect ive years and proport ion thereof utilized by the
appellant in investment in shares I find that there was sufficient cash
profits available with the appellant for making the investment in
shares. What is important in this regard is that the appellant had
sufficient non interest bearing funds for making the investments in
shares of the group companies. The disallowance of Rs .11,61,306/- by
invoking section 14A is unwarranted and hence ground no. 4 is
allowed.”
13. On perusal of the records and having regard to the
representation made by both sides, we find two reasons to agree
with the conclusion drawn by the CIT(A). Firstly, it emerges that
the assesse has not derived any exempt income per se. It is well
settled that in the absence of any exempt income, no disallowance
under s.14A of the Act is permissible in view of the decision of the
Hon’ble Gujarat High Court in the case of CIT vs. Corrtech Energy
P. Ltd. 372 ITR 97 (Guj.). In another judgment in the case of CIT
vs. Vision Finstock Ltd. Tax Appeal No. 486 of 2017 dated
31.07.2017 the Hon’ble Gujarat High Court has once again
expressed the similar view and held that disallowance of
expenditure in terms of Section 14A r.w. Rule 8D cannot exceed the
exempt income itself. It is noticed that SLP(Civil) [Diary No.
13152/2018] filed by the Revenue against the judgment of the
Hon’ble Gujarat High Court in Vision Finstock Ltd. (supra) has
been dismissed on merits by the Hon’ble Supreme Court vide order
dated 07.05.2018. The reference is also made to the decision of
Hon’ble Supreme Court of India in CIT vs. Chettinad Logistics (P.)
Ltd. (2018) 95 taxmann.com 250 (SC).
13.1 Secondly, the assessee has demonstrated sufficient net worth
from which a presumption would naturally arise that investment for
I T A N o . 6 2 / R P R / 2 0 1 8 ( AC I T v s . M a h a m a ya
S t e e l In d u s t r i e s L t d . ) A . Y . 2 0 1 3 – 1 4 – 13 –
the purposes of earning exempt income is out of such own interest
free funds available at the disposal of the assessee. A reference in
this regard has been made on behalf of the assessee to the several
judicial precedents including CIT vs. HDFC Bank Ltd. (2014) 89
CCH 0185 (Bombay High Court); CIT vs. Suzlon Energy Ltd. (2013)
354 ITR 630 (Guj.).
13.2 Thus, having regard to absence of any exempt income as well
as availability of sufficient net worth of interest free nature, we do
not see any reason to differ with the view taken by the CIT(A).
Thus, no interference with the order of the CIT(A) is called for.
Consequently, ground no.3 of Revenue’s appeal is dismissed.
14. In the result, appeal of the Revenue is dismissed.
Order pronounced on 21/10/2021 b y placing the result on
the Notice Board as per Rule 34(4) of the Income Tax
(Appellate Tribunal) Rule, 1963.
Sd/- Sd/-
(N. K. CHOUDHRY) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
True Copy
S. K. SINHA
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आय,
ु त / Concerned CIT
4. आयकर आय,
ु त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, रायपुर /
DR, ITAT, RAIPUR
6. गाड7 फाइल / Guard file.
By order,
Sr. Private Secretary
ITAT, Raipur (on Tour)
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