2025:CGHC:45162-DB Digitally signed by SISTA NAFR SISTA SOMAYAJULU SOMAYAJULU Date:

2025.09.06 HIGH COURT OF CHHATTISGARH AT BILASPUR

13:12:27 +0530 TAXC No. 7 of 2021 {Arising out of order dated 7-11-2019 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.235/RPR/2014}

(Assessment Year 2012-13)

Deputy Commissioner of Income Tax-Central Circle 2(1), Raipur, Chhattisgarh ... Appellant versus M/s Mahamaya Steel Industries Ltd., Mahamaya Tower, 3^rd & 4^th Floor, In front of Anupam Nagar, Near Varun Honda, G.E. Road, Raipur, Chhattisgarh ... Respondent For Appellant / : Mr. Amit Chaudhari, Senior Standing Counsel for Revenue the Income Tax Department through Video Conferencing and Mr. Vijay Chawla, Advocate.

For Respondent / : Mr. Sumit Nema, Senior Advocate with Mr. Anand Assessee Dadariya, Advocate.

Division Bench: -

Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sanjay Kumar Jaiswal, JJ.

Judgment on Board (04/09/2025)

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 27-2-2023 by formulating the following substantial question of law: -

“Whether on the facts and in law, the Income Tax Appellate Tribunal was justified in deleting the addition of Rs.6,65,01,000/- by the Assessing Officer on the ground that the assessee had suppressed its yield and had indulged in unaccounted production and sales?”

2. The aforesaid question of law arises on the following factual backdrop: -

3. The respondent herein/assessee is engaged in the manufacturing of re-rolled products such as heavy steel structural, joist and girder. Search and seizure on the premises of the assessee was conducted on 21-6-2011, assessment was completed on 27-3-2014 and order was passed under Section 153A read with Section 143(3) of the IT Act for the assessment year 2012-13. The Assessing Officer has made an addition on account of unaccounted sales based on an estimated production yield of 89% in the assessee’s SMS Division. The Assessing Officer adopted an estimated yield ratio and proceeded to calculate alleged unaccounted production and consequential sales, resulting in substantial additions over multiple years. The Assessing Officer has made addition of ₹ 6,65,01,000/-

by recording following finding:-

“1.2 Thus based on the evidences found during the search and seizure action, following conclusions can be drawn: -

(1) During the search and seizure action short stock of finished goods and raw material totaling to Rs. 79,18,418 was found.

(2) The actual production shown by the assessee company is much less than the installed capacity and even the capacity utilization varies from year to year.

(3) There is no uniform/scientific methodology for measurement of input of raw material. The burning losses are reported based on estimation and not actual.

(4) In the SMS division there is wide variation in consumption of sponge iron vis a vis production of finished goods in different months of the year.

(5) In the SMS division there is no co relation between the consumption of raw material, electricity and finished goods whereas, by and large the production process, the production set up and the sources of raw materials supplies remain the same.

(6) In the SMS division of the company there is wide variation in the consumption of electricity vis a vis production of finished goods, in different months (7) The figures of production and consumption of SMS division shown in the books of accounts of the assessee do not reflect its true state of affairs.

(8) In the rolling mill division there is wide variation in the consumption of electricity vis a vis production of finished goods in different months of a year.

(9) In the rolling mill division there is wide variation in the consumption of furnace oil vis a vis production of finished goods in different months of a year.

(10) In the rolling mill division there is wide variation in the consumption of raw material vis a vis production of fini