SHAH MANUFACTURERS, MUMBAI V. ASST CIT CIR 15(1), MUMBAI

CO 177/MUM/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7059 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 07-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: PARAS S SALVA
• Keywords: Income from undisclosed sources
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 5449/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-15(1), MATRU MANDIR TARDEO ROAD, MUMBAI 400 007 .. APPELLANT V/S M/S. SHAH MANUFACTURERS 114-C, MITTAL COURT NARIMAN POINT MUMBAI 400 007 PAN AAZFS2398Q .... RESPONDENT C.O. NO.177/MUM./2011 (ARISING OUT OF ITA NO. 5449/MUM./2010 ) (ASSESSMENT YEAR : 2007-08 ) M/S. SHAH MANUFACTURERS 114-C, MITTAL COURT NARIMAN POINT MUMBAI 400 007 PAN AAZFS2398Q . CROSS OBJECTOR V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-15(1), MATRU MANDIR TARDEO ROAD, MUMBAI 400 007 .. RESPONDENT REVENUE BY : MR. GOLI SRINIVAS RAO ASSESSEE BY : MR. PARAS S. SALVA DATE OF HEARING 07.02.2012 DATE OF ORDER 10.02.2012 SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 2 O R D E R PER J. SUDHAKAR REDDY, A.M. APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJE CTION PREFERRED BY THE ASSESSEE, ARE DIRECTED AGAINST THE IMPUGNED ORD ER DATED 26 TH APRIL 2010, PASSED BY THE COMMISSIONER (APPEALS)-XXVI, MUMBAI, FOR ASSESSMENT YEAR 2007-08. WE FIRST TAKE UP REVENUES APPEAL. THE SOL E GROUND RAISED, READS AS FOLLOWS:- 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN REJECTING THE APPLICABI LITY OF SECTION 145(3) OF THE ACT IN THE PRESENT CASE, OVERLOOKING THE FAC TS THAT THE ASSESSEE DOES NOT MAINTAIN OPENING STOCK AND CLOSING STOCK O F THE CONSUMABLES AND IN ABSENCE OF SUCH DETAILS OF CONSUMABLES TOGET HER WITH CONSUMPTION OF ELECTRICITY AND LABOUR IN NUMBERS, N O TRUE PROFIT CAN BE WORKED OUT. 2. THE LEARNED CIT(A), ON THE FACTS AND CIRCUMSTANC ES OF THE CASE ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE AD DITION OF ` 2,65,63,747 IGNORING THE FACTS THAT THE ASSESSEE SU PPRESSED THE PRODUCTION TO THE EXTENT OF 36449 KARAT OF DIAMOND AND 86,883 KARAT IN PROCESSING CLEAVING AND SAWING OF DIAMOND BASED ON CONSUMPTION OF ELECTRICITY AND EMPLOYMENT OF LABOUR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION T O THE TUNE OF ` 90,91,965 IN RESPECT OF MANUFACTURING CHARGES FROM THE RELATED PARTY, IGNORING THE FACT THAT THE ASSESSEE PAID TO THE OUT SIDE PARTY @ 546.71 CARET AND CHARGED JUST ` 523 CARET FROM M/S. ASIAN STAR CO. LTD. THE SISTER CONCERN, LEADING TO SUPPRESSION OF RECEIPT F ROM SISTER CONCERN. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REGISTERED PARTNERSHIP FIRM ENGAGED IN PROCESSING OF DIAMONDS ON BEHALF OF THE PRINCIPAL AND CARRYING ON BUSINESS FROM THE PREMISES OF ASIAN STA R CO. LTD. THE ASSESSEE FIRM IS DOING CLEAVING AND PROCESSING WORK ON BEHAL F OF TWO PRINCIPALS NAMELY, M/S. ASIAN STAR CO. LTD. AND VIPUL TRADING CO. IT RECEIVES ROUGH DIAMONDS FROM THESE TWO PRINCIPALS AND GETS IT CUT AND POLISHED THROUGH ITS WORKERS EMPLOYED BY IT IN THE FACTORY. DURING THE Y EAR UNDER ASSESSMENT, THE ASSESSEE RECEIVED LABOUR CHARGES OF ` 22,73,53,747 AND PAID LABOUR CHARGES OF ` 21,31,79,348, TO ITS WORKERS AND INCURRED OTHER M ANUFACTURING AND OPERATING EXPENSES LIKE ELECTRICITY, CONSUMABLE S, FACTORY EXPENSES, ETC. SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 3 TO THE TUNE OF ` 97,67,747, AND AFTER DEDUCTING ALL EXPENSES, THE A SSESSEE SHOWED NET TAXABLE INCOME AT ` 41,11,200. DURING THE YEAR, THE ASSESSEE INCURRED TOTAL ELECTRICITY EXPENSES OF ` 47,66,442. 3. THE ASSESSING OFFICER OBSERVED THAT THERE IS A VARI ATION IN ELECTRICITY CONSUMPTION ON MONTH-TO-MONTH BASIS AND HAS ALSO CO NTENDED THAT THE ASSESSEE IS DOING JOB WORK FOR ITS SISTER CONCERN A ND HAS SUPPRESSED PRODUCTION IN VARIOUS MONTHS. HE OBSERVED THAT THE ASSESSEE HAS NOT KEPT DAY-TO-DAY STOCK OF CONSUMABLES AND NO OPENING STOC K AND CLOSING STOCK OF CONSUMABLES IS ON RECORD. HE HAS GIVEN WORKING BASE D ON VARIOUS ASSUMPTIONS WHICH IS RECORDED IN PARA-5 OF THE ASSE SSMENT ORDER AND ON THE BASIS OF THESE DETAILS OF CONSUMABLES TOGETHER WITH CONSUMPTION OF ELECTRICITY AND NUMBER OF LABOUR, HE REACHED TO A C ONCLUSION THAT NO TRUE PROFIT CAN BE WORKED OUT ON THE BASIS OF BOOKS OF A CCOUNT MAINTAINED AND HENCE HE APPLIED PROVISIONS OF SECTION 145(3) OF TH E ACT. HE HAS GIVEN WEIGHTAGE TO MANUFACTURING AND CLEAVING AND SAWING IN THE RATIO OF CHARGES RECEIVED AS MENTIONED IN CHART-II AT PAGE-7 OF THE ASSESSMENT ORDER. HE WORKED OUT EXTRA PRODUCTION OF 36449.99 CARATS IN M ANUFACTURING AND 86883.32 CARAT IN CLEAVING AND SAWING AND APPLYING THE RATE PER CARAT OF ` 550 FOR MANUFACTURING AND ` 75, FOR CLEAVING AND SAWING ARRIVED AT ` 2,65,63,747 TOWARDS UNACCOUNTED INCOME RECEIVED, WH ICH IS NOT SHOWN IN THE BOOKS OF ACCOUNT. 4. BEING AGGRIEVED BY THE STAND TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST APPELL ATE AUTHORITY, WHEREIN THE COMMISSIONER (APPEALS), BASED ON THE ARGUMENTS OF T HE ASSESSEE WITH DOCUMENTARY EVIDENCES, FIGURES AND FACTS, WAS OF TH E OPINION. HE HELD THAT ASSESSING OFFICER HAS MADE ADDITIONS PURELY ON ASSU MPTION AND GUESSWORK THAT MERELY ON THE BASIS OF ASSUMPTION, NO SUCH ADD ITION OF ` 2,65,63,747, CAN BE MADE AS INCOME FROM EXTRA LABOUR RECEIPTS. A DETAILED OBSERVATION MADE BY THE COMMISSIONER (APPEALS), IS AS FOLLOWS:- 4. I HAVE CONSIDERED THE FINDINGS OF THE A.O. AS WE LL AS THE CONTENTIONS OF THE APPELLANT IN THE GROUNDS OF APPE AL, STATEMENT OF FACTS, WRITTEN SUBMISSIONS DATED MARCH 8, 2010 AND PAPER BOOK SUBMITTED BY THE A.R. CAREFULLY. I FIND THAT THE AD DITION OF LABOUR SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 4 CHARGES IS MADE PURELY ON ASSUMPTION BASIS AND GUES S WORK WITHOUT ANY SUPPORTING DOCUMENTS OR EVIDENCE. THE LEARNED A .R. HAS GIVEN DETAILED REASONING IN HIS WRITTEN SUBMISSION WHY EL ECTRICITY CONSUMPTION AND WORKERS EMPLOYED HAVE NO DIRECT REL EVANCE FOR ACTUAL PRODUCTION. HE HAS DISCUSSED THIS ISSUE AT P ARA-1.2 & 1.3 OF HIS WRITTEN SUBMISSION WHICH IS AS UNDER:- 1.2 WHY ELECTRICITY CONSUMPTION HAS NO DIRECT RELEVANCE FOR ACTUAL PRODUCTION? 1.2.1 THE ROUGH DIAMONDS ARE SUBJECTED TO MANY PROCESSES LIKE CLEAVING, SAWING, BRUTING, GRINDING AND POLISHING TO OBTAIN THE FINAL PRODUCT VIZ. CUT AND POLISHED DIAMONDS. DIAMOND IS NOT A STANDARD / HOMOGENEOUS PRODUCT. EACH DIAMOND IS DIFFERENT AND VARIES FROM ANOTHER. THUS, IT IS NOT POSSIBLE TO HAVE STANDARD RATIO OF ELECTRICITY CONSUMPTION PER CARAT PROCESSED OR NO. OF CARATS PROCESSED PER WORKER. IF THERE ARE MORE PLAC ES PER CARAT, THEN ELECTRICITY CONSUMPTION WILL BE MORE PE R CARAT AND VICE VERSA. 1.2.2 THE TYPE OF PROCESS REQUIRED ALSO MATTERS. SO ME DIAMONDS MAY REQUIRE BLADE CUTTING & SAWING WHEREAS SOME MAY REQUIRE LASER CUTTING & SAWING. LASER MACH INES CONSUME HEAVY ELECTRICITY. IF THE USAGE OF LASER MA CHINE IS MORE THAN THE ELECTRICITY CONSUMPTION PER CARAT PROCESSED INCREASES. 1.2.3 THERE ARE AUTOMATIC MACHINES WHERE SOMETIMES ONE PERSON CAN LOOK AFTER 4 DIAMONDS BEING PROCESSE D AT A TIME AND SOMETIMES ONLY ONE DIAMOND AT A TIME. 1.2.4 ELECTRICITY CONSUMPTION PER CARAT VARIES ALSO BECAUSE OF THE TYPE OF MACHINES USED AND THE WORK L OAD. THIS ALSO RESULTS IN THE VARIATION IN THE AVERAGE U NIT CONSUMPTION AND AVERAGE PRODUCTION PER WORKER. 1.2.5 FIXED USAGE OF ELECTRICITY FOR AIR CONDITIONE RS, LIFTS PASSAGE LIGHT, ROOM LIGHT, FANS, CORRIDOR AND STAIR CASE LIFT, ETC., IRRESPECTIVE OF THE NUMBER OF CARATS PROCESSE D ALSO AFFECTS THE AVERAGE CONSUMPTION PER CARAT. 1.2.6 THE ELECTRICITY CONSUMPTION VARIES WITH THE S EASON ALSO. IN SUMMER, DUE TO INCREASED USE OF AIR CONDIT IONER, ELECTRICITY CONSUMPTION IS MORE WHILE IN WINTER, IT IS LESS. SO THE CONSUMPTION OF ELECTRICITY VARIES WITH THE S EASON AND NOT WITH PRODUCTION. 1.2.7 SOMETIMES ON ONE POLISHING MACHINE, TWO WORKE RS SIT AND SOMETIMES FOUR WORKERS ALSO SIT. IN BOTH TH E CASES, CONSUMPTION OF ELECTRICITY IS SAME BUT PRODU CTION IS DIFFERENT. 1.2.8 WHEN FACTORY IS IN RUNNING CONDITION, YOU HAV E TO KEEP MOST OF THE ELECTRICAL POINTS LIKE LIFT, AIR C ONDITIONS, SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 5 PASSAGE LIGHT, HALL LIGHT, CABIN LIGHT, ETC. ON WHE THER PRODUCTION IS THERE OR NOT, ALL THESE POINTS HAVE T O BE KEPT ON. HENCE, IT DOES NOT HAVE ANY CONNECTION WIT H PRODUCTION. 1.2.9 THE TOTAL COST OF ELECTRICITY IN PERCENTAGE O F RECEIPT IS ONLY 2.1% WHILE WAGES AND LABOUR CHARGES IS 93.7 6% SO ELECTRICITY IS VERY NEGLIGIBLE COST FACTOR AND I T CANNOT BE CO-RELATED WITH THE PRODUCTION. 1.3 WHY WORKERS EMPLOYED DOE NOT HAVE DIRECT RELEVANCE FOR ACTUAL PRODUCTION? 1.3.1 ALL THE WORKERS ARE FIRMS OWN WORKERS AND TH EY ARE NOT ON CONTRACT BASIS. THE NUMBER OF WORKERS EMPLOY ED DOES NOT VARY WITH THE VOLUME OF WORK. SO EVEN IF T HERE IS LESS WORK, YOU HAVE TO CONTINUE WITH THE WORKERS AN D HENCE, YOUR PRE WORKER PRODUCTION VARIES BECAUSE SO ME WORKERS ARE SITTING IDLE FOR SOME TIME OF THE DAY O R SOME DAYS OF THE MONTH. 1.3.2 WHEN THERE IS HEAVY FLOW OF WORK, AVERAGE PRODUCTIVITY PER WORKER INCREASES AS COMPARED TO TH E SLACK TIME WHERE THERE IS SAME NUMBER OF WORKERS WI TH LESS PRODUCTION. 4.2 FURTHER, IT IS WORTHWHILE TO MENTION THAT ELECT RICITY EXPENSES AS COMPARED TO PREVIOUS YEAR IN TERMS OF % OF EXPENSES HAS BEEN REDUCED FROM 6.5% TO 2.10% AND ALSO FACTORY EXPENSE S HAS BEEN REDUCED FROM 3.83% LAST YEAR TO 1.81% FOR THE RELEV ANT PREVIOUS YEAR. IT APPEARS THAT THIS VITAL ASPECT OF THE ISSUE HAS NOT BEEN PROPERLY APPRECIATED BY THE A.O. 4.3 AN OTHER ANGLE OF THE ISSUE ALSO SUPPORTS THE C ONTENTION OF THE LD. AR THAT THE YIELD OF POLISHED DIAMONDS FOR THE RELEVANT PREVIOUS YEAR OF PRINCIPAL COMPANY HAS ALSO IMPROVED. THE YI ELD OF LAST 3 YEARS OF THE PRINCIPAL OF THE APPELLANT M/S. ASIAN STAR C O. LTD. EXTRACTED FROM PAPER BOOK IS AS UNDER:- A.Y. ACCOUNTING YEAR % YIELD (EXCLUDING SEMI-PROCESSED GOODS) 2005-06 2004-05 31.60% 2006-07 2005-06 32.43% 2007-08 2006-07 32.50% ASIAN STAR CO. LTD. ALSO PROCESSES SEMI-FINISHED CU T AND POLISH DIAMONDS INTO COMPLETE CUT AND POLISH DIAMONDS. THE YIELD OF ASIAN STAR CO. LTD. FOR THE F.Y. 2006-07 RELEVANT TO A.Y. 207-08 (INCLUDING SEMI-PROCESSED GOODS) IS 47.36%. THE YIELD OF LAST 3 YEARS OF M/S. ASIAN STAR CO. LTD. IS AS FOLLOWS:- SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 6 A.Y. ACCOUNTING YEAR % YIELD (EXCLUDING SEMI-PROCESSED GOODS) 2005-06 2004-05 46.60% 2006-07 2005-06 50.57% 2007-08 2006-07 47.36% THE ABOVE YIELD IS OBVIOUSLY BETTER THAN THE AVERAG E YIELD IN THE INDUSTRY AND HENCE THE QUESTION OF ANY SUPPRESSION OF PRODUCTION OR INCOME DOES NOT ARISE. THEREFORE, PRESUMPTION OF LD . A.O. IS UNFOUNDED. FURTHER, ANOTHER IMPORTANT FACTS IS NOTED THAT THE AVERAGE LABOUR CHARGES RECEIVED BY THE APPELLANT FROM ITS PRINCIPA L WORKS OUT TO ` 580.50 PER CARAT WHICH IS ALSO HIGHER THAN THE AVER AGE INDUSTRY LABOUR CHARGES RANGING BETWEEN 300-400 AND HENCE ALSO THE QUESTION OF SUPPRESSION OF ANY PROFIT DOES NOT ARISE. THE LEARNED A.R. HAS GIVEN LAST THREE YEARS ELECTRI CITY CONSUMPTION AT PAGE NO.4.2, 4.3 AND 4.4 OF HIS PAPER BOOK. I HAVE ANALYZED THE ELECTRICITY CONSUMPTION OF THE APPELLANT FOR THE LA ST THREE YEARS AND FOUND THAT IT IS HIGHER IN THE MONTHS OF MAY TO OCT OBER AND LOWER IN THE MONTHS OF DECEMBER TO MARCH. THIS VARIATION IS MAINLY DUE TO HIGHER CONSUMPTION OF ELECTRICITY IN SUMMER AND LOW ER IN WINTER. BELOW IS A CHART SHOWING ELECTRICITY CONSUMPTION PER CARA T OF PRODUCTION FOR LAST 3 YEARS. A.Y. ACCOUNTING YEAR AVERAGE ELECTRICITY CONSUMPTION PER CARAT 2005-06 2004-05 9.15% 2006-07 2005-06 9.87% 2007-08 2006-07 9.62% FROM THE ABOVE CHART, IT IS VERY MUCH CLEAR THAT TH E AVERAGE ELECTRICITY CONSUMPTIONS FROM YEAR TO YEAR IS CONSISTENT. THERE FORE, SUCH IMPORTANT FACTS CANNOT BE IGNORED. IT TRANSPIRES TH AT LD. A.O. HAS GONE THEORETICALLY WITHOUT BRINGING ON RECORDS CORROBORA TIVE EVIDENCES. THEREFORE, NO ASSESSMENT CAN BE MADE ON THE BASIS O F GUESSWORK AND ASSUMPTION WITHOUT BRINGING ANY COGENT EVIDENCE OR MATERIAL ON RECORD VIDE:- (I) INTERNATIONAL FOREST CO. V/S CIT, (1975) 101 ITR 72 1 (J&K); (II) ACIT V/S SAILESH S. SHAH, 63 ITD 163, (MUM. TRIB.); (III) DHAKESWARI COTTON MILLS LTD. V/S CIT, 26 ITR 775 (S C); (IV) STEEL WORK LTD. V/S CIT, 69 ITR 366 (ASSAM); AND (V) OMAR SALAY SAIT V/S CIT, (1959) 37 ITR 151 (SC). THE A.R. HAS ALSO VEHEMENTLY ARGUED THAT BOOKS OF A CCOUNT BE REJECTED UNDER SECTION 145(3) ON PRESUMPTION OR ARB ITRARILY. HE HAS RELIED ON THE FOLLOWING CASE LAWS:- SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 7 (I) SHABNAM MARBLES PVT. LTD. V/S CIT, 77 TTJ 189 (JAI. ) (II) TRIVENI PHARMA V/S ITO (JAI.). 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIB UNAL. 6. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE, MR. GOLI SRINIVAS RAO, REPRESENTING THE REVENUE, ASSAILING THE IMPUGN ED ORDER PASSED BY THE COMMISSIONER (APPEALS), SUBMITTED THAT THE ASSESSEE WAS DOING JOB WORK FOR ITS SISTER CONCERN AND HAS SUPPRESSED PRODUCTION IN VARIOUS MONTHS. THE DAY-TO-DAY STOCK OF CONSUMABLES AND OPENING STOCK A S WELL AS CLOSING STOCK OF THE CONSUMABLES ARE NOT ON RECORD. EVEN THERE IS A VARIATION IN ELECTRICITY CONSUMPTION ON MONTH-TO-MONTH BASIS. ACCORDING TO H IM, ON THE BASIS OF DETAILS OF CONSUMABLES TOGETHER WITH CONSUMPTION OF ELECTRICITY AND NUMBER OF LABOURS ENGAGED, THE ASSESSING OFFICER HAS RIGHT LY APPLIED THE PROVISIONS OF SECTION 145(3), AS NO TRUE PROFIT CAN BE WORKED OUT ON THE BASIS OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. KEEPING THES E IN VIEW, HE, ACCORDINGLY, PRAYED THAT THE ORDER PASSED BY THE AS SESSING OFFICER BE UPHELD. 7. LEARNED COUNSEL, MR. PARAS S. SALVA, REPRESENTING T HE ASSESSEE, SUBMITTED BEFORE US THAT THE ASSESSEE IS DOING MANU FACTURING WORK FOR TWO PRINCIPALS VIZ M/S. ASIAN STAR CO. LTD. AND M/S. VI PUL TRADING CO. IT IS CHARGING M/S. ASIAN STAR CO. LTD. ` 526 PER CARAT ON ANNUAL AVERAGE BASIS AND CHARGING ` 550 PER CARAT TO M/S. VIPUL TRADING CO. IF THE PER CENTAGE OF WORK IS SEEN, THE MAIN WORK IS COMING FROM M/S. ASI AN STAR CO. LTD. AND THE ASSESSEE IS ALSO UTILISING THE PREMISES OF M/S. ASI AN STAR CO. LTD. THE ELECTRICITY EXPENSES VARY FROM MONTH-TO-MONTH ON AC COUNT OF MANY REASONS. ONE OF THE REASONS IS CARET MANUFACTURED. DURING TH E YEAR, THE ASSESSEE INCURRED TOTAL ELECTRICITY EXPENSES OF ` 47,66,442 AND THE ASSESSING OFFICER HAS TOTALLY CONNECTED IT WITH PRODUCTION AND ON ASS UMPTION BASIS. THE ASSESSING OFFICER HAS ARBITRARILY CONCLUDED THAT TH E ASSESSEE GOT EXTRA PRODUCTION OF ` 36,449 CARETS IN MANUFACTURING AND 86,883 CARETS I N CLEAVING AND SAWING AND HAS APPLIED THE AVERAGE RATE OF MANU FACTURING AND CLEAVING. HE, THUS, PRAYED THAT THE ORDER PASSED BY THE COMMI SSIONER (APPEALS) BE UPHELD. SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 8 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD, WE HOLD AS FOLLOWS:- 9. NO DOUBT, THE ASSESSING OFFICER HAS MADE ADDITION O N THE BASIS OF ASSUMPTION AND, IN OUR CONSIDERED OPINION, ASSUMPTI ON AND PRESUMPTION CANNOT BE A BASIS OF MAKING ADDITION. THE COMMISSIO NER (APPEALS) HAS GIVEN DETAILED FINDINGS, WHICH ARE EXTRACTED ABOVE, FOR C OMING TO THE CONCLUSION OF DELETING THE ADDITION AND THE SAME ARE NOT REPEATED HERE. WE FIND THAT ELECTRICITY EXPENSES INCURRED FOR THE YEAR UNDER AS SESSMENT, AS COMPARED TO PREVIOUS YEAR IN TERMS OF PERCENTAGE OF EXPENSES, H AS REDUCED FROM 6.5% TO 2.10% AND ALSO FACTORY EXPENSES HAS BEEN REDUCED FR OM 3.83% LAST YEAR TO 1.81% FOR THE RELEVANT PREVIOUS YEAR. SUCH IMPORTAN T ASPECT OF THE ISSUE HAS NOT BEEN DISCUSSED BY THE ASSESSING OFFICER. THE CO MMISSIONER (APPEALS) HAS RIGHTLY ANALYZED THE ELECTRICITY CONSUMPTION OF THE ASSESSEE FOR THE LAST THREE YEARS AND FOUND THAT IT IS HIGHER IN THE MONT HS OF MAY TO OCTOBER AND LOWER IN THE MONTHS OF DECEMBER TO MARCH. THE VARIA TION IN CONSUMPTION OF ELECTRICITY IS MAINLY BECAUSE OF HIGHER CONSUMPTION OF ELECTRICITY IN SUMMER AND LOWER CONSUMPTION IN WINTER. THEREFORE, THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN ASSUMING THAT THERE IS A VARIATION IN CONSUMPTION OF ELECTRICITY IN MONTH-TO-MONTH BASIS AND MAKING ADDITION IN LIEU TH EREOF. THE ASSESSING OFFICER, FOR MAKING SUCH ADDITION, HAS NOT BROUGHT ANY EVIDENCE ON RECORD. IN OUR VIEW, ASSESSMENT CANNOT BE MADE ON THE BASIS OF ASSUMPTION OR GUESSWORK WITHOUT BRINGING ANY COGENT EVIDENCE OR M ATERIAL ON RECORD. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING TH E BOOKS OF ACCOUNT BY APPLYING THE PROVISIONS OF SECTION 145(3) OF THE AC T. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE COMMISSIONER (APPEALS) AND DECLINE TO INTERFERE IN THE MATTER AS SUCH. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. WE NOW TAKE UP ASSESSEES CROSS OBJECTION. 11. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE AS SESSEE HAS PREFERRED THIS CROSS OBJECTION, WHICH IS IN SUPPORT OF THE OR DER OF THE CIT(A). SINCE WE SHAH MANUFACTURERS ITA NO.5449/MUM.2010 C.O. NO.177/MUM./2011 9 HAVE DISMISSED THE APPEAL PREFERRED BY THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. CONSEQUE NTLY, WE DISMISS THE GROUND RAISED BY THE ASSESSEE AS INFRUCTUOUS. 12. IN THE RESULT, ASSESSEES CROSS OBJECTION IS DISMIS SED. 13. TO SUM UP, REVENUES APPEAL AS WELL AS ASSESSEES C ROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY 2012 SD/- R.S. PADVEKAR JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 10 TH FEBRUARY 2012 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, H BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI