ITO, W-2, Mandi Gobindgarh V. M/s Ruby Strips Pvt. Ltd., Mandi Gobindgarh

ITA 1276/CHANDI/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5024 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2018
• 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
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 1276/CHD/2017 ASSESSMENT YEAR : 2012-13 THE ITO, VS. M/S RUBY STRIPS PVT LTD., WARD-3, TALWARA ROAD, MANDI GOBINDGARH MANDI GOBINDGARH PAN NO. AAACR8106M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, SR DR RESPONDENT BY : SH. ASHOK GOYAL, CA DATE OF HEARING : 11.05.2018 DATE OF PRONOUNCEMENT: 11.05.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 21/06/2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS), PATIALA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. WHITHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LD. CIT(A) 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 ITA NO.1276/CHD/2017- M/S RUBY STRIPS PVT LTD., CHANDIGARH 2 OBSERVATIONS OF DIFFERENT COURTS THAT EVERY YEAR IS AN INDEPENDENT ASSESSMENT YEAR. 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER RESTORED. 3. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING O F IRON & STEEL PRODUCTS VIZ FLATS & BARS . DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DET AILS OF DAILY PRODUCTION OF FINISHED GOODS AS WELL AS THE DETAILS OF THE MANUFACTURING PROCESS INVOLVED. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT THE AMOUNT OF ELECTRICITY CONSUMED WA S DIRECTLY RELATED TO THE PRODUCTION OF FINISHED GOODS. IN ORDER TO CO -RELATE THE CONSUMPTION OF ELECTRICITY VIS--VIS PRODUCTION SHO WN, THE ASSESSING OFFICER GATHERED INFORMATION REGARDING THE CONSUMPT ION OF ELECTRICITY FROM THE ELECTRICITY BOARD. THE ASSESSING OFFICER A NALYZED THE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE PRODU CTION OF FINISHED GOODS AND OBSERVED THAT THERE WERE WIDE VARIATION I N RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FI NISHED GOODS PRODUCED DURING THE YEAR. HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTRIC UNITS CONSUMED WERE VERY LOW WHEREAS FINIS HED GOODS PRODUCED WERE VERY HIGH GIVING A VERY LOW VALUE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINISHED GOODS, WHEREAS ON S OME OTHER DAYS, ELECTRIC UNITS CONSUMED WERE VERY HIGH WHEREAS THE FINISHED GOODS PRODUCED WERE VERY LESS GIVING A VERY HIGH VALUE OF ELECTRIC UNITS CONSUMED PER METRIC UNIT OF FINISHED GOODS. HE FURT HER OBSERVED THAT EVEN ON SOME DAYS THOUGH THERE WAS ELECTRICITY CONS UMPTION YET NO ITA NO.1276/CHD/2017- M/S RUBY STRIPS PVT LTD., CHANDIGARH 3 PRODUCTION WAS SHOWN. HE FURTHER NOTED THAT OTHERWI SE ON OTHER DAYS, THERE WAS ALSO A BALANCE AND CONSISTENCY IN CONSUMP TION OF ELECTRIC UNITS VIS-A-VIS PRODUCTION OF FINISHED GOODS. HE, T HEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTION RECORDE D BY THE ASSESSEE OF THE FINISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED THAT THE DATA RELATING TO THE DAILY PRODUC TION HAD NOT BEEN MAINTAINED AS PER ACTUAL PRODUCTION. WHEN CONFRONTE D IN THIS RESPECT, THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELEC TRICITY WAS DEPENDENT ON VARIOUS FACTORS AS DETAILED IN HIS REP LY WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSME NT ORDER. THE ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY OF THE ASSESSEE. HE ULTIMATELY HELD THAT THE ASSESSEE COMPANY WAS INVOLVED IN UNACCOUNTED PRODUCTION OF FINISHED GOOD S WHICH RESULTED IN UNACCOUNTED SALES AND PURCHASES. HE, THEREFORE, HELD THAT THE SALE AND PURCHASE FIGURES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT AND HE ACCORDINGLY REJECTED THE BOOKS OF AC COUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT') AND PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THEREAFTER WORKED OUT THE UNACCOUNTED INCOME OF THE ASSESSEE ON ACCOUNT OF UNACCOUNTED PRODUCTION AND ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). ITA NO.1276/CHD/2017- M/S RUBY STRIPS PVT LTD., CHANDIGARH 4 5. BEFORE LD. CIT(A), THE ASSESSEE FILED DETAILED S UBMISSIONS. IT WAS ALSO BROUGHT INTO THE KNOWLEDGE OF THE CIT(A) T HAT SUBSEQUENT TO THE PASSING OF THE ABOVE STATED IMPUGNED ASSESSMENT ORDER, A DETAILED STUDY WAS CARRIED OUT BY A COMMITTEE HEADED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE, MANDI GOBINDGARH HAVING ALL THE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. THE COMMITTEE WAS ASSISTED BY THE EXPERTS FROM THE NISST (NATIONA L INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY) AND ALSO THE INDUSTRY R EPRESENTATIVES. ON THE BASIS OF THE REPORT OF THE COMMITTEE, IT WAS DECIDED THAT IF THE VARIATION IN THE CONSUMPTION OF THE ELECTRICITY IS WITHIN THE RANGE OF 15% OF THE YEARLY AVERAGE CONSUMPTION OF POWER, THE BOOK RESULTS SHOULD BE ACCEPTED. ACCORDINGLY, ITS BOOK RESULTS W ERE ACCEPTED FOR THE ASSESSMENT YEAR 2013-14. IT WAS, THEREFORE, PLE ADED THAT ITS BOOK RESULTS FOR THE ASSESSMENT YEAR 2012-13 SHOULD ALSO BE ACCEPTED AND CONSEQUENTLY, THE ADDITION SHOULD BE DELETED. THE L D. CIT(A) GOT VERIFIED FROM THE ASSESSING OFFICER THE ABOVE CONTE NTIONS OF THE ASSESSEE WHICH WAS REPORTED TO BE CORRECT BY THE AS SESSING OFFICER. THE LD. CIT(A) THEREAFTER HELD THAT ONCE AN ISSUE HAS BEEN DECIDED ON MERITS IN A SUBSEQUENT YEAR, IT WOULD NOT BE APP ROPRIATE TO TAKE A DIFFERENT VIEW FOR THE YEAR UNDER CONSIDERATION. HE , THEREFORE, RELYING UPON THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA HELD THAT AS DE CIDED BY THE COMMITTEE, THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISH ED GOODS PRODUCED FROM THE AVERAGE WORKED OUT ON YEARLY BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVERSE COGNIZANCE. HE AC CORDINGLY HELD ITA NO.1276/CHD/2017- M/S RUBY STRIPS PVT LTD., CHANDIGARH 5 THAT SINCE PURSUANT TO THE REPORT OF THE COMMITTEE, THE ASSESSING OFFICER HAS ALREADY FOLLOWED THIS NORM WHILE MAKING THE ASSESSMENT IN SIMILAR CASES AND IN SAME SET OF CIRCUMSTANCES H AS ACCEPTED THE BOOKS RESULTS SHOWN BY THE ASSESSEE WHICH INCLUDED THE ASSESSEE AS WELL, HENCE, HE FOLLOWING THE PRINCIPLE OF CONSISTE NCY LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF CIT VS. RIETA BISCUITS CO. (P) LTD [2009] 309 ITR 154 (P&H) HELD THAT THE BOOKS RESULTS SHOWN BY THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION NEED TO BE ACCEPTED, AS WELL. HE THER EFORE, SET ASIDE THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BO OKS OF ACCOUNT AND DIRECTED THE ASSESSING OFFICER TO ACCEPT THE BOOK R ESULTS SHOWN BY THE ASSESSEE AND DELETED THE ADDITIONS SO MADE BY T HE ASSESSING OFFICER ON ESTIMATION BASIS. 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE REVENUE HAS COME IN APPEAL BEFORE US. 7. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THE TRIBUNAL IN THIS RESPECT AND HAS R ELIED UPON THE FOLLOWING RECENT DECISIONS :- I) ITO VS. AMAR ISPAT UDYOG ITA NO. 384/CHD/2017 ORDER DATED 26.10.2017 II) ITO VS. PREM STEEL & ALLIED INDUSTRIES ITA NO. 672/CHD/2017 DATED 10.11.2017 8. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND FO RCE IN THE CONTENTION OF THE LD. AR. THE ISSUE IS SQUARELY COV ERED BY THE ABOVE REFERRED TO DECISIONS OF THE TRIBUNAL WHEREIN WHILI NG DISMISSING THE ITA NO.1276/CHD/2017- M/S RUBY STRIPS PVT LTD., CHANDIGARH 6 IDENTICAL APPEALS OF THE REVENUE, THE TRIBUNAL HAS OBSERVED AS UNDER:- 7. . 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 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. HE HAS ALSO OBSERVED THAT PURSUANT TO THE REPORT OF COMMITTEE, THE ASSESSING OFFICERS HAVE ALSO FOLLOWED THIS NORM WHILE MAKING ASSESSMENT IN SIMILAR TYPE OF CASES AND HAVE ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSES. 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 FOR THIS YEAR ALSO 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. 9. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF CIT(A) AND, ACCORDINGLY WE UPHOLD SAME. THE APP EAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11.05.2018 RKK ITA NO.1276/CHD/2017- M/S RUBY STRIPS PVT LTD., CHANDIGARH 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR