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2. Facts may be noted from Tax Appeal No. 542 of 2015. The appeal is filed by the Revenue challenging the judgement of the Income Tax Appellate Tribunal dated 27.02.2015. The respondent-assessee is engaged in the business of manufacturing ceramic tiles. For the assessment year 2004-05, the assessee had filed the return of income. The regular HC-NIC Page 3 of 22 Created On Tue Jul 05 00:52:18 IST 2016 O/TAXAP/542/2015 JUDGMENT assessment of such return was completed at the relevant time. Later on, the Director General of Central Excise Intelligence ['DGCEI' for short], Ahmedabad, searched the assessee's premises on 17.01.2008. During such search, several incriminating documents were recovered. The investigation led to a prima facie revelation that the assessee was engaged in large scale financial irregularities which were unearthed by DGCEI. The findings of the said authority were that there was a suppression of sale of Rs. 5.90 crores (rounded off) by the assessee. On the basis of such materials collected by the DGEI, the show-cause notice was issued by the Excise Department. The show cause notice and the accompanying materials were forwarded by the Excise Department to the Income Tax Department. On the basis of such materials, the Assessing Officer re-opened the assessment of the assessee for the assessment year 2004-05 by issuing notice under Section 148 of the Income Tax Act, 1961 ['the Act' for short] on 22.03.2011. The assessee was supplied the reasons recorded by the Assessing Officer for issuing such notice. During the re- assessment proceedings, the assessee contested the validity of the notice for reopening as also the quantum additions proposed by the Assessing Officer. Ignoring such objections, the Assessing Officer passed order of assessment on 15.12.2011 and held that there was a suppressed sale of Rs. 98.18 lacs in case of the assessee. Applying the gross profit rate of 25%, he made addition of Rs. 24.54 lacs in the assessee's total income.

"16. We find on an analysis of the reasons as recorded, that the AO has firstly recorded the nature of the business of the assessee and the background under which the AO recorded that Director General of Central Excise Intelligence, Ahmedabad (DGCEI) in the case of the assessee found that there was a HC-NIC Page 5 of 22 Created On Tue Jul 05 00:52:18 IST 2016 O/TAXAP/542/2015 JUDGMENT suppression of sale for the purpose of levy of excise duty and accordingly issued show cause notice, a copy of which was received by him from CIT, Central-2, Ahmedabad. Thereafter, the AO recorded the background under which the DGCEI made investigation and search in the case of the assessee and the background under which show cause notice came to be issued in the case of the assessee by the DGCEI. 


HC-NIC                             Page 10 of 22     Created On Tue Jul 05 00:52:18 IST 2016
           O/TAXAP/542/2015                                              JUDGMENT
2. The facts of the case is that, the Directorate General of Central Excise Intelligence, Ahmedabad Zonal Unit [herein after referred to as DGCEI for the sake of brevity] collected an intelligence, indicating that the manufacturers of Ceramic glazed and Vitrified tiles of Morbi and other parts of the State of Gujarat, are engaged in large scale evasion of Central Excise duty by adopting modus operandi like removing finished goods from their registered factory premises by not delcaring the actual MRP of their products in the Central Excise Invoice, mis declaring in the Central Excise Inovices the actual ex factory prices of such tiles, which is recoverable from their buyers, sale of tiles in the market at prices which vary according to the quality and grade and that the invoices are prepared for third quality, whereas, supply is made of first quality, that the differential value, over and above the value declared in the Central Excise invoices, was collected by them in cash from the buyers and such cash amounts are not accounted for in their statutory records etc. Thus, the allegation is that, the assessee had adopted a fraudulent method to keep the landed cost of tiles at the barest minimum at the destination so that it does not exceed the artificial MRP declared in the Central Excise Invoices. Subsequently, in order to transfer such cash amounts from dealers, different methods were adopted by them viz., in case of transfer from within the State of Gujarat, cash amounts were mostly transferred through angadias and where transfer is from locations outside Gujarat, cash amounts were sometimes collected personally by the authorized representatives or their sales personnel during their visit to the dealers or even by the angadias. Evidence of such transfer of cash also forms part of the exhaustive show cause issued by the CED. Discreet verification from the banks revealed that, over Rs. 1000 crores were exchanged hands as unaccounted cash amounts, in the aforesaid manner, through a number of shroffs situated in Morbi, Rajkot, Himmatnagar and Ahmedabad. Therefore, the DGCEI conducted a detailed investigation in the matter and factory premises of the assessee was covered under search on 17.01.2008 during which several incriminating documents were recovered, which lead to the confirmation of the intelligence. Records and documents as listed in the annexures tot he panchnamas dated 17.1.2008 drawn at the factory premises of HC-NIC Page 11 of 22 Created On Tue Jul 05 00:52:18 IST 2016 O/TAXAP/542/2015 JUDGMENT the assessee, were seized by them for further investigation. Report on such detailed investigation is contained in the show cause notice issued by the Excise department. In the said report, corroborative evidence were also gathered and kept on record by the Excise department. Hence, the said report of the excise department is foolproof and there is substantial material evidence of suppression of sale. The show cause notice by the Excise department also quantified the extent of suppressed sale.
3. I have therefore reasons to believe that the assessee's income to the above extent has escaped assessment within the meaning of section 147 of the I T Act and that, such escapement was by reason of the omission and failure of the assessee to disclose fully and truly all material facts. Hence, the assessment is required to be reopened."

8. Substantially similar reasons have been recorded by the Assessing Officer in all the cases as well. We, therefore, adopt these reasons as a test case to judge the validity of the rival contentions. If one peruses the reasons minutely, it is recorded by the Assessing Officer that in case of the assessee which is engaged in the business of manufacturing ceramic tiles, the DGCEI had unearthed various financial irregularities which led to issuance of show-cause notice by the Excise Department for suppression of sale of Rs. 5.90 crores worth of stock. The show- cause notice was forwarded by the Excise Department to the Income Tax Department. It was noticed that the ceramic tiles manufactures of Morbi and other parts of the State of Gujarat were engaged in large scale evasion of excise duty by removing finished goods from their registered factories by misdeclaring HC-NIC Page 12 of 22 Created On Tue Jul 05 00:52:18 IST 2016 O/TAXAP/542/2015 JUDGMENT the ex-factory price of such tiles to the Excise Department. The Assessing Officer, therefore, noted that the allegation was that the assessee had adopted a fraudulent method to suppress the cost of tiles and cash amounts received from the dealers were routed through different methods. It was noticed that the DGCEI had conducted detailed investigation in the matter and that factory premises of the assessee was searched on 17.01.2008, during which, several incriminating documents were recovered. The Assessing Officer noted that records and documents were listed in an annexure to a panchnama drawn on 17.01.2008. A detailed report of such investigation formed part of the show-cause notice issued by the Excise Department which also contained corroborative evidence. According to the Assessing Officer, therefore, there was substantial material evidence of suppression of sale which was also quantified by the department. In the show-cause notice it was on the basis of these materials at the command of the Assessing Officer that he has formed a belief that the income chargeable to tax has escaped assessment.