ITO, W-2, Mandi Gobindgarh V. Suresh Kumar HUF, Mandi Gobindgarh

ITA 1275/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5206 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 30-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Unexplained investment; Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE MS.DIVA SINGH, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1275/CHD/2017 (A.Y : 2012-13) INCOME TAX OFFICER, WARD-2, MANDI, GOBINDGARH VS. SURESH KUMAR HUF, C/O M/S RADHIKA STEEL INDUSTRIES, G.T. ROAD,MANDI GOBINDGARH PAN : AAFHS 9510 L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, SR. DR RESPONDENT BY : SHRI TEJ MOHAN SINGH, ADVOCATE DATE OF HEARING : 30.01.2018 DATE OF PRONOUNCEMENT : 08.02.2018 ORDER PER: ANNAPURNA GUPTA, A.M.: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), PATIALA (HEREINAFTER REFERRED TO AS CIT(APPEALS)) DATED 12.06.2017. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS A RE-ROLLING MILL, WHEREIN IRON AND STEEL P RODUCTS ARE MANUFACTURED. DURING ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER NOTED THAT THE AMOUNT OF ELECTRIC ITY CONSUMED WAS DIRECTLY RELATED TO THE PRODUCTION OF FINISHED GOODS. IN ORDER TO CO-RELATE THE CONSUMPT ION OF ELECTRICITY VIZ-A-VIZ, THE PRODUCTION SHOWN, THE ASSESSING OFFICER GATHERED INFORMATION REGARDING CONSUMPTION OF ELECTRICITY FROM THE ELECTRICITY BOA RD. 2 THE ASSESSING OFFICER, THEREAFTER, ANALYZED THE CONSUMPTION DATA OF ELECTRICITY VIZ-A-VIZ, THE PROD UCTION OF FINISHED GOODS AND OBSERVED THAT THERE WAS WIDE VARIATION IN THE RATIO OF ELECTRICITY UNITS CONSUME D TO PER METRIC TONNE (HEREINAFTER REFERRED TO AS PMT) OF FINISHED GOODS PRODUCED. THE AO OBSERVED THAT THE ELECTRICITY CONSUMPTION PMT OF FINISHED GOODS VARIE D FROM 0.36 UNITS AND 259.69 UNITS, WITH THE AVERAGE FOR THE ENTIRE YEAR BEING 158.82 UNITS. HE FURTHER NOTE D THAT THERE WERE CERTAIN DAYS WHEN THERE WAS HIGH CONSUMPTION OF ELECTRICITY BUT NO PRODUCTION OF FIN ISHED GOODS. IT WAS ALSO OBSERVED THAT THERE WAS DAYS ON WHICH ELECTRICITY CONSUMED PMT OF FINISHED GOODS WA S LOW BUT THE PRODUCTION OF FINISHED GOODS WAS VERY H IGH. WHEN CONFRONTED WITH THIS ASPECT THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT ON VARIOUS FACTORS NAMELY, DELAY OR TIME LAG IN THE RECORDING OF PRODUCTION IN BOOKS, DIFFERENCE IN TYPE AND QUALITY OF RAW MATERIAL USED, POWER CUTS, GRID FAILURES, VOLTAGE FLUCTUATIONS, MILL CONDITION, MOT OR, BREAK DOWN AND LABOUR EFFICIENCY ETC. THE ASSESSING OFFICER, WAS HOWEVER, NOT SATISFIED WITH THE REPLY OF THE ASSESSEE.AS A CONSEQUENCE ,HE HELD THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE BOOKS OF ACCO UNT OF THE ASSESSEE AND THEREFORE, REJECTED THE SAME BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I. T. ACT. THEREAFTER,THE AO ESTIMATED THE UNACCOUNTED PRODUCTION OF FINISHED GOODS BY ADOPTING THE VALUE OF 3 ELECTRICITY CONSUMED PMT ON THE BASIS OF MINIMUM AVERAGE VALUE FOR THE PERIOD OF 30 DAYS. ACCORDINGL Y, HE TOOK THE LOWEST AVERAGE VALUE AT 133.56 UNITS PMT A ND COMPUTED THE QUANTUM OF ACTUAL GOODS PRODUCED AND THEREAFTER, ASCERTAINED THE UNACCOUNTED PRODUCTION OF EACH MONTH AFTER DEDUCTING THE FINISHED GOODS PRODU CED DURING THE MONTHS SHOWN IN THE BOOKS OF ACCOUNT. FURTHER, ON THE BASIS OF AVERAGE SALES RATE,THE TOT AL UNACCOUNTED PRODUCTION WAS ESTIMATED IN MONETARY TERMS AND THEN ADOPTING THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE, THE UNACCOUNTED PROFIT OUT OF THE UNACCOUNTED PRODUCTION WAS WORKED OUT. FURTHER, THE PEAK UNACCOUNTED PRODUCTION FOR THE RELEVANT MONTH WAS DETERMINED AND BY MULTIPLYING WITH THE AVERAGE SALES RATE OF FINISHED GOODS, THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THE ASSESSING OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INVESTMEN T IN UNACCOUNTED PRODUCTION AT RS.63,50,762/- AND THE UNACCOUNTED PROFIT OUT OF UNACCOUNTED PRODUCTION AT RS.4,93,596/-,THEREBY MAKING ADDITION ON ACCOUNT O F TOTAL UNACCOUNTED INCOME OF RS.68,44,358/-. 4. BEING AGGRIEVED WITH THE ABOVE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). DURING APPELLATE PROCEEDINGS BE FORE THE LD. CIT(A), THE ASSESSEE FILED DETAILED SUBMISS IONS. IT WAS ALSO BROUGHT TO THE KNOWLEDGE OF THE CIT(A) THAT SUBSEQUENT TO THE PASSING OF THE ABOVE STATED ASSESSMENT ORDER,A DETAILED STUDY WAS CARRIED OUT AT 4 THE INSTANCE OF THE PRINCIPAL CIT,PATIALA, WITH A V IEW TO EXAMINE THE FLUCTUATION IN THE CONSUMPTION PATTERN OF ELECTRICITY VIS A VIS PRODUCTION IN THE ROLLING MIL LS AND INDUCTION FURNACES OF THE AREA, BY A COMMITTEE HEAD ED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE , MANDI GOBINDGARH, HAVING ALL THE ASSESSING OFFICER S OF THE RANGE AS ITS MEMBERS. IT WAS SUBMITTED THAT THE COMMITTEE WAS ASSISTED BY THE EXPERTS FROM THE NISS T (NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLO GY) AND ALSO THE INDUSTRY REPRESENTATIVES. THE LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT ON THE BASIS OF THE REPORT OF THE COMMITTEE, IT WAS DECIDED THAT IF THE VARIATION IN THE CONSUMPTION OF ELECTRICITY IS WITH IN THE RANGE OF 15% OF THE AVERAGE CONSUMPTION OF POWER, T HE BOOK RESULTS SHOULD BE ACCEPTED. THE ASSESSEE POINT ED OUT THAT FOLLOWING THE SAID RECOMMENDATION, BOOK RESULTS OF OTHER FIRMS IN SIMILAR TRADE HAD BEEN AC CEPTED FOR THE ASSESSMENT YEAR 2013-14 IN SIMILAR CASES. I T WAS THEREFORE CONTENDED THAT THE BOOK RESULT OF THE ASS ESSEE SHOULD ALSO BE ACCEPTED AND THE ADDITION MADE, BE THEREFORE DELETED. THE LD. CIT(A) GOT THE ABOVE FAC TS VERIFIED FROM THE ASSESSING OFFICER, WHO ALSO CONCE DED THAT THE VARIATION IN THE CONSUMPTION OF ELECTRICIT Y UNITS PMT OF FINISHED GOODS OF THE ASSESSEE WAS LES S THAN 15% OF THE YEARLY AVERAGE ON HIGHER SIDE WHERE AS IT WAS MORE THAN 15% OF THE LOWER SIDE. THE LD. CIT(A) INTERPRETED THE HIGHER VARIATION ON THE LOWER SIDE POSITIVELY AND HELD THEREFORE, THAT OVERALL VARIATI ON OF 5 CONSUMPTION OF ELECTRICITY WAS TO BE CONSIDERED WIT HIN 15% OF THE ANNUAL AVERAGE CONSUMPTION PMT OF PRODUCTION AND CONSIDERING THE RECOMMENDATION OF TH E COMMITTEE,ACCORDINGLY HELD THAT THE BOOK RESULTS SH OWN BY THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION NEEDED TO BE ACCEPTED. THEREFORE, THE LD.CIT(A), SET ASIDE THE ACTION OF THE ASSESSING OF FICER IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE A ND DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICE R ON ACCOUNT OF UNACCOUNTED INVESTMENT AND UNACCOUNTED PROFITS. 5. AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT(A), THE REVENUE HAS COME UP IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTMENT AND UNACCOUNTED PROFIT OUT OF UNACCOUNTED PRODUCTION EVEN WHEN THE VARIATION OF CONSUMPTION OF ELECTRICITY WAS MORE THAN 15%. MORE SO, THIS ACTION OF THE LD. CIT(A) IS UNCALLED FOR BEING CONTRARY TO THE OBSERVATIONS OF DIFFERENT COURTS THAT EVERY YEAR IS AN INDEPENDENT ASSESSMENT YEAR. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROU GHT TO OUR NOTICE THAT IDENTICAL ISSUE, WHEREIN ADDIT ION MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS AS DISCUSSED ABOVE WAS DELETED BY THE LD. CIT(A) FOLLO WING THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PCIT , PATIALA, ISSUING GUIDELINES RELATING TO ACCEPTABILI TY OF 6 VARIATION UPTO 15% IN ELECTRICITY CONSUMPTION PATTE RN, THE REVENUE PREFERRED AN APPEAL BEFORE THIS TRIBUNA L AND THIS TRIBUNAL VIDE ITS ORDER DATED 28.04.2017 PASSED IN A BUNCH OF NINE CASES, WITH THE LEAD CASE BEING ITO VS. M/S SINGLA CONCAST PVT. LTD. IN ITA NO.403/CHD/2017, HAD UPHELD THE ORDER OF THE CIT(A ), DIRECTING THE ASSESSING OFFICER TO ACCEPT THE BOOK RESULTS SHOWN BY THE ASSESSEE AND TO DELETE THE ADDITIONS MADE ON ACCOUNT OF UNACCOUNTED PROFITS/UNACCOUNTED INVESTMENT. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE RELEVANT FINDING OF I.T.A.T. AT PARAS 8 TO 10 OF THE ORDER AS UNDER: 8. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS BROUGHT TO OUR KNOWLEDGE THAT ON IDENTICAL ISSUES, WHEREIN THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS AS DISCUSSED ABOVE WERE UPHELD BY THE CONCERNED CIT(A), THE ASSESSEES PREFERRED APPEALS BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VIDE ITS COMMON ORDER DATED 14.2.2017, PASSED IN A BUNCH OF ABOUT 85 APPEALS IN THE CASE OF M/S MODI OIL & GENERAL MILL, MANDI GOBINDGRH AND OTHERS IN ITA NO. 149/CHD/2016 AND OTHERS WHILE OBSERVING THAT CONSEQUENT TO THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL, COMMISSIONER OF INCOME TAX, PATIALA SOME INTERNAL GUIDELINES REGARDING ACCEPTABILITY OF VARIATION UPTO 15% HAVE BEEN ISSUED AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE IN SUBSEQUENT YEARS BY THE ASSESSING OFFICER, HAS REMANDED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GUIDELINES ISSUED BY THE PRINCIPAL, COMMISSIONER OF INCOME TAX, PATIALA. 9. THE LD. COUNSEL HAS STATED THAT THIS MATTER NEED NOT TO BE RESTORED IN THE PRESENT APPEALS AS THE LD. CIT(A) WHILE DECIDING THE ABOVE APPEALS IN- FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA. THAT THE COMMITTEE SO CONSTITUTED WAS A BROAD BASED MULTI MEMBER BODY HAVING ADDITIONAL COMMISSIONER OF INCOME TAX, MANDI GOBINDGARH AS 7 ITS HEAD AND ALL THE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. IT WAS ALSO ASSISTED BY THE EXPERTS OF THE NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDUSTRY REPRESENTATIVES. THE LD. CIT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTEE. THE SAME HAS ALREADY BEEN FOLLOWED BY THE ASSESSING OFFICER IN SUBSEQUENT ASSESSMENT YEAR. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHILE DIRECTING THE ASSESSING OFFICER TO ACCEPT THE BOOKS RESULTS SHOWN BY THE ASSESSEE AND TO DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PROFITS / UNACCOUNTED INVESTMENT MADE ON ESTIMATION BASIS AS DISCUSSED ABOVE. THE ORDER OF THE CIT(A) IS, THEREFORE, UPHELD. 10. SINCE THE FACTS AND ISSUE INVOLVED IN ALL THE OTHER CAPTIONED APPEALS ARE IDENTICAL, HENCE, IN VIEW OF OUR FINDINGS GIVEN ABOVE, WE DO NOT FIND ANY MERIT IN ALL THE APPEALS OF THE REVENUE AND THE SAME ARE ACCORDINGLY DISMISSED. 6. THE LD. DR POINTED OUT THAT THERE WAS A DISTINGUISHING FACT IN THE PRESENT CASE WITH THE AS SESSEE SHOWING VARIATION EXCEEDING 15% ON THE LOWER SIDE O F THE YEARLY AVERAGE CONSUMPTION. THE LD. DR, THEREFO RE, PLEADED THAT THE DECISION OF THE I.T.A.T. RELIED UP ON THE LD. COUNSEL OF THE ASSESSEE WOULD NOT APPLY TO THE PRESENT CASE AND THAT FOR THIS REASON THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAD BEEN CORRECTLY REJECTE D BY THE ASSESSING OFFICER. THE LD. DR, THEREFORE, CONTE NDED THAT THE ORDER OF THE ASSESSING OFFICER WAS TO BE U PHELD. 7. WE HAVE HEARD THE CONTENTION OF BOTH THE PARTIES . UNDISPUTEDLY THE ADDITION IN THE PRESENT CASE HAS B EEN MADE ON ACCOUNT OF PROFITS EARNED ON UNACCOUNTED PRODUCTION AND ON ACCOUNT OF INVESTMENT MADE FOR TH E PURPOSE OF UNACCOUNTED PRODUCTION, FOR THE REASON T HAT 8 THERE WAS DISPARITY IN CONSUMPTION OF ELECTRICITY V IZ-A- VIZ THE PRODUCTION SHOWN BY THE ASSESSEE. IT IS ALS O A ADMITTED FACT THAT THE ISSUE OF DISPARITY IN CONSUMPTION OF ELECTRICITY VIZ-A-VIZ PRODUCTION IN THE STEEL ROLLING MILLS OF THE AREA, HAD BEEN A MATTER OF DETAILED STUDY WHICH WAS CONDUCTED BY A COMMITTEE CONSTITUTED BY THE PCIT, PATIALA AND WHICH HAD ACCEPTED VARIATION OF 15% IN THE CONSUMPTION PATTER N OF ELECTRICITY AS BEING NORMAL. IT IS ALSO NOT DISPUTE D THAT ON THE BASIS OF THIS REPORT THE ASSESSMENT ORDERS I N THE CASE OF SEVERAL ASSESSEES HAD BEEN PASSED ACCEPTING BOOK RESULTS SINCE THE ASSESSEES HAD SHOWED VARIATI ON IN THE CONSUMPTION PATTERN OF ELECTRICITY WITHIN TH E ACCEPTABLE RANGE. THE I.T.A.T.,WE FIND, IN GROUP O F CASES WITH THE LEAD CASE BEING SINGLA CONCAST PVT. LTD. (SUPRA) HAS ACCEPTED THAT IN VIEW OF NORMS OUTLINED BY THE COMMITTEE, THERE WAS NO REASON TO REJECT THE BO OK RESULTS SHOWN BY THE ASSESSEE WHO HAVE REFLECTED VARIATION IN THE PRODUCTION PATTERN WITHIN THE ACCEPTABLE RANGE AS PRESCRIBED BY THE COMMITTEE CONSTITUTED. IN VIEW OF THE SAME AND SINCE AS PER T HE FACTS OF THE PRESENT CASE, THE CONSUMPTION OF ELECT RICITY IS LESS THEN 15% OF THE YEARLY AVERAGE THE DECISION RENDERED BY THE I.T.A.T. IN THE CASE OF SINGLA CONC AST PVT. LTD. (SUPRA) WILL SQUARELY APPLY TO THE PRESEN T CASE FOLLOWING WHICH WE UPHOLD THE ORDER OF THE LD. CIT( A) DIRECTING THE ASSESSING OFFICER TO ACCEPT THE BOOK RESULT SHOWS BY THE ASSESSEE AND TO DELETE THE ADDITIONS M ADE 9 ON ACCOUNT OF UNACCOUNTED PROFITS/UNACCOUNTED INVESTMENT. THE CONTENTION OF THE LD. DR THAT THE ASSESSEE HAV ING SHOWN VARIATION OF MORE THAN 15% ON THE LOWER SIDE OF THE AVERAGE,WE FIND, MERITS NO CONSIDERATION, SINCE WE AGREE WITH THE LD. CIT(A) THAT LOWER CONSUMPTION OF ELECTRICITY FOR THE SAME QUANTUM OF PRODUCTION SHOU LD BE VIEWED POSITIVELY AND NOT ADVERSELY. THEREFORE, WE AGREE WITH THE LD.CIT(A) THAT THIS CANNOT BE THE BA SIS FOR REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN VIEW OF ABOVE, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH FEBRUARY, 2018 AKS/ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH