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Judgment
PER SUDHIR KUMAR, JUDICIAL MEMBER:
The captioned appeal is filed by the Assessee against the order of the Ld. National Faceless Appeal Centre (NFAC) dated 23/06/2025 pertaining to Assessment Year 2013-14 on the following grounds:-
“1.That on the same / identical background, issue grounds, basis of addition, facts and circumstances as stated by the AO in the impugned assessment order for AY 2013-14, the ITAT, Bench-G, New Delhi vide order dated 20.6.2025 in ITA No. 7761/Del./2018 and ITA No. 7189/del/2018 has deleted the addition in assessee’s own case for AYs 2014-15. Hence, the addition of Rs. 1,17,46,145/- in the impugned assessment order for AY 2013-14 deserves to be deleted.
2.That on the Facts and circumstances of the case, the Assessment order passed by the Ld. CIT(A) is bad in law.
3.That Ld. CIT(A) has erred both in law and on the facts of the case in passing the assessment order pending the final order from excise department.
4.That Ld. CIT(A) has erred both in law and on the facts of the case in relying on documents recovered from premises of third party pertaining to other parties and using the same as corroborative evidence against the assessee.
5.That Ld. CIT(A) has erred both in law and on facts in applying an ad hoc G.P rate of 3.11% on the total sales resulting into addition of Rs. 32,88,075/-. However, the assessee as well as other companies in same trade have much lower rate of G.P. during last three year and also addition is made without rejecting the books of accounts.
6.That Ld. CIT(A) has erred both in law and on the facts of the case in making an addition of Rs. 84,58,070/-on account of undisclosed investment undisclosed sale in alleged undisclosed sale.
7.That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
8.That the appellant craves leave to amend, delete or add any grounds of appeal before or during the course of hearing of the appeal.”
Brief facts of the case are that, the Assessee company is engaged in the business of manufacturing of M.S. Ingot. The assessee had filed its return of income for AY 2013-14 on 28.9.2023 disclosing total income Rs. NIL. The assessment u/s. 143(3) of the Act was completed on 28.3.2016 by ITO, Ward 2(3), Muzaffarnagar at Rs. NIL income after allowing depreciation of Rs. 42,37,129/-. The jurisdiction of the assessee case was transferred to DCIT, Circle-2, Muzaffarnagar vide PCIT Muzaffarnagar’s order u/s. 127(2) of the Act dated 6.6.2016. Further, the AO had received information from Central Excise Department that the assessee company evaded Union Excise Duty on account of clandestine sale. The case of the assessee was reopened u/s. 147 of the Act and notice u/s. 148 of the Act issued on 20.8.2018. In response to the said notice, the assessee had filed return of income for AY 2013-14 on 21.9.2018 declaring total income of Rs. NIL. The AO passed the assessment order u/s. 143(3) r.w.s. 147 of the Act on 28.12.2019 determining total income at Rs. 1,11,59,630 by making the following additions:-
Depreciation debited to P&L account of Rs. 22,94,500/-.
ii) Disallowance on account of penalty of Rs. 5,00,965/-.
iii) Addition made vide order u/s. 143(3) dated 28.3.2016
a. On account of misc expenses and freight outward of Rs. 2,50,000/-
b. On account of interest of Rs. 78,630/-
GP on undisclosed sale of MS Ingots of Rs. 32,88,075/-
Unaccounted capital to carry out unaccounted sale of Rs. 84,58,070.-
Against the above order, assessee preferred the appeal before the Ld. CIT(A)/NFAC, who vide his order dated 23.6.2026 has dismissed the appeal of the assessee for statistical purposes.
Aggrieved, assessee is in appeal before the Tribunal.
The Ld. Counsel for the Assessee vehemently submitted that the sole basis for the addition made by the A.O. was the information shared by Central Excise Department consequent to search conducted upon on M/s Trikoot Iron and Steel Pvt. Ltd. Muzaffarnagar, however, A.O. without making any independent enquiry with either Trikoot or from Excise Department or any other person, made additions in the hands of the Assessee. The Ld. Counsel further submitted that the Hon’ble Custom, Excise and Service Tax Appellate Tribunal (CESTAT) vide order dated 09/09/2024 in Excise Appeal No. 55779/2023 (M/s Trikoot Iron and Steel Ltd. vs. Additional Directorate General of GST Intelligence), allowed the Appeal of the Appellant therein. Thus, the very basis of the addition made by the A.O. in the present case, which the show cause notice issued on account of sales outside books of accounts and investment of undisclosed capital stands wiped out, therefore, the addition made by the A.O. in the hands of the Assessee will not sustain. Ld. Counsel for the assessee submitted that on identical issues, the ITAT, Bench-G, New Delhi vide order dated 20.6.2025 in ITA No. 7761/Del/2018 and ITA No. 7189/Del/2018 has deleted the addition in assessee’s own case for AYs 2014-15. Hence, the addition of Rs. 1,17,46,145/- in the impugned assessment order for AY 2013-14 deserves to be deleted.
Per contra, the ld. Ld. Departmental Representative relying on the orders of the Lower Authorities, sought for allowing the Appeal.
We have heard the rival contentions and perused the records, especially the order of the ITAT, Bench-G, New Delhi dated 20.6.2025 passed in ITA No. 7761/Del/2018 and ITA No. 7189/Del/2018 has deleted the addition in assessee’s own case for AYs 2014-15 by observing as under:-
“7.We have heard both the parties and perused the material available on record. The Co-ordinate Bench of the Tribunal while dealing with the similar issue, deleted the addition in the case of Bhageshwari Papers Pvt. Ltd (supra) in following manners:-
“10.We have carefully considered the rival submissions and perused the material available on record. The estimated additions made arising from undisclosed sales outside books of accounts and estimated additions towards undisclosed capital employed on such undisclosed sales is in controversy. It is the case of the assessee that the entire basis of additions towards undisclosed sales and consequent additions towards undisclosed investment is certain print out taken by the Central Excise Department from the hard disk and pen drive recovered from the premises of Trikoot in a search carried out by the Central Excise Department. However, the panchnama prepared at the premises of Trikoot does not bear any reference to recovery of hard disk and pen drive. Consequently, adverse opinion towards undisclosed sales made by the assessee to Trikoot flowing from such pen drive etc. is neither admissible as evidence nor it can be examined for this purpose as held in appellate order passed by Excise Tribunal. It is further a case of the assessee that consequent upon search in the case of Trikoot, a search was carried out at the premises of the assessee as well. However, Central Excise Department could not recover any adverse material from the premises of the assessee either.
11.The AO in the instant case has also not brought any material on record adverse to the assessee. The sole basis of estimated addition is a show cause notice issued by the Central Excise Department, the aforesaid proceedings against the third party (Trikoot) by Central Excise Department has been quashed and therefore, no firm basis exists any longer against the assessee. Thus we find substantial force in the plea of the assessee for reversal of the additions on this score.
12.As emerges from the assessment order, the AO has entertained adverse inference based on ‘show cause notice’ issued by the Director of DG of Central Excise Intelligence on Trikoot and reference to some loose papers therein. As pointed out on behalf of the assessee, the appellate authority of Central Excise Department has quashed the proceedings against Trikoot. The relevant paras of the judgement are reproduced hereunder:-
18.“Thus, we find that according to the Tribunal the assessing officer had merely relied upon information received from the Sales Tax Department, Government of Maharashtra without carrying out any independent enquiry. Tribunal had recorded as finding that assessing officer had failed to show that the purchased materials were bogus and held that there was no justification to doubt genuineness of the purchases made by the respondent-assessee.
19.We are in agreement with the views expressed by the Tribunal. Merely on suspicion based on information received from another authority, the assessing officer ought not to have made the additions without carrying out independent enquiry and without affording due opportunity to the respondent-assessee to controvert the statements made by the sellers before the other authority. Accordingly, we do not find any good ground to entertain this question for consideration as well.
20.Consequently, we find no merit in the appeal preferred by the Revenue. Appeal is dismissed.”
13.Significantly, the AO has also not made any independent enquiry in the course of search to assert the additions. No independent material to corroborate the allegation of unrecorded sales is available on record. The ratio of judgement referred in the case of PCIT vsSapoorjiPallonji& Co. Ltd. (supra) would thus squarely apply. The Hon’ble Bombay High Court in that case observed that the AO had merely relied upon the information received from the Sales Tax Department, Government of Maharasthra without carrying out any independent enquiry.”
8.It is also noticed that the Ld. A.O. issued a show cause notice on the sole basis of the notice issued by the Central Excise Department to the Assessee pursuant to the search conducted by the central Excise Department on the premises of M/s Trikoot Iron and Steel Ltd. The Ld. A.O. made the addition pursuant to the said search and based on the material found during the search conducted by the Excise Department on M/s Trikoot Iron and Steel Ltd. The Hon’ble CESTAT in Excise Appeal No. 55779/2023, vide order dated 09/09/2024 quashed the additions made in the hands of M/s Trikoot Iron and Steel Ltd. by allowing the Appeal. Further, Hon’ble CESTAT has also allowed Assessee’s Appeal in Excise Appeal No. 50759/2022 vide order dated 08/05/2025, wherein deleted the demand of duty and imposition of penalty.
9.Considering the above facts and circumstances, we are of the opinion that the Ld. A.O. erred in making the additions in the hands of the Assessee and we find no reason to sustain the addition made by the A.O. which deserves to be deleted. In the result, the appeal of the Assessee is allowed and the impugned assessment order and the order of the Ld. CIT(A) are hereby set aside. In the result, Appeal of the Assessee in ITA No. 7761/Del/2018 is allowed.”
In view of the aforesaid factual matrix and respectfully following the aforesaid precedent in assessee’s own case for assessment year 2014-15, we are of the considered view that the A.O. erred in making the additions in the hands of the Assessee, hence, we find no reason to sustain the additions made by the A.O. which deserves to be deleted. We hold and direct accordingly.
In the result the appeal of the assessee is allowed.