M/s. I.P. Patel & Co., Surat V. The Addl.Circle-9, Surat

ITA 1958/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9867 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K TIWARI SRDR
• Keywords: Corroborative evidences
• Section: 143(3); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.1958/AHD/2010 ASSESSMENT YEAR:2006-07 DATE OF HEARING:1.10.10 DRAFTED:4.10.10 M/S. I.P. PATEL & CO. 404, SUPER DIAMOND MARKET, KAPODARA, SURAT, PAN NO.AAAF16501Q V/S . ADDL. COMMISSIONER OF INCOME-TAX, CIRCLE-9, SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI HARDIK VORA, AR RESPONDENT BY:- SHRI A.K. TIWARI, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-V, SURAT IN APPEAL NO.CAS-V/25 9/08-09 DATED 09-03-2010. THE ASSESSMENT WAS FRAMED BY ACIT, RANGE-9, SURAT U /S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VI DE HIS ORDER DATED 31-12-2008 FOR ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY ASSESSING OFFIC ER ON ACCOUNT OF ELECTRICITY EXPENSES AT RS.7,63,792/-. FOR THIS, ASSESSEE HAS R AISED THE FOLLOWING GROUND NO.1 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING DISALLOWANCE OF RS.7,63,792/- ON ACCOUNT OF ELECTRICITY EXPENSES. ITA NO.1958/AHD/2010 A.Y. 2006-07 M/S. I.P. PATEL & CO. V. ACIT, CIR-9, SRT PAGE 2 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT, EXPORT AND MANUFACTURING OF DIAMOND. THE AS SESSEES TURNOVER DECLARED DURING THE COURSE OF YEAR UNDER CONSIDERATION WAS A T RS.87.03 CRORES OUT OF WHICH DIRECT SALE OF ROUGH DIAMOND AT RS.60.91 CRORES. FU RTHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THA T ASSESSEE HAS CLAIMED ELECTRICITY EXPENSES AT RS.15,25,945/- AS AGAINST T HE PREVIOUS YEARS CLAIM OF RS.14,32,431/- AND HE COMPARED THE CONSUMPTION OF E LECTRICITY WITH CONSUMPTION OF ROUGH DIAMOND OF MANUFACTURING AND NOTED THAT THE C ONSUMPTION OF ROUGH DIAMOND FOR MANUFACTURING IS REDUCED BY 74% AND CORRESPONDI NGLY THE CONSUMPTION OF ELECTRICITY HAS INCREASED AT 6%. ACCORDINGLY AO MAD E DISALLOWANCE OF 50% OF ELECTRICITY EXPENSES AS NOT JUSTIFIED. AGGRIEVED, A SSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE DISALLOWANCE BY GI VING FOLLOWING FINDING IN PARA-4 OF HIS APPELLATE ORDER:- 4. I HAVE PERUSED THE FINDINGS OF THE AO AND THE S UBMISSIONS MADE BY THE APPELLANT. THE AO IN HIS REASONED ORDER HAS COME TO A FINDING THAT CONSUMPTION OF ELECTRICITY IS NOT COMMENSURATE WITH THE VOLUME OF MANUFACTURING ACTIVITIES. THE AO HAS OBSERVED THAT EXPENSES TOWARDS ELECTRICITY CONSUMPTION HAS INCREASED BY 6% WHEREAS MANUFACTURING ACTIVITY OF ROUGH DIAMOND HAS DECREASED BY 74%. THIS HAS BEE N FURTHER SUPPORTED BY THE FACT THAT DURING THE YEAR THE ASSESSEE CARRIED OUT MANUFACTURING ACTIVITY IN RESPECT OF 54151 CARROTS OF DIAMONDS AS AGAINST 201 165 CARROTS OF ROUGH DIAMONDS MANUFACTURED DURING THE PRECEDING YEAR. TH E AO FURTHER OBSERVED THAT CENTRAL AC SYSTEM WAS NOT A NEW ADDITION DURIN G YEAR IN RESPECT OF WHICH THE ASSESSEE IS CLAIMING INCREASED EXPENSES ON ELEC TRICITY. AS A MATTER OF FACT, IN THE WRITTEN SUBMISSION, THE AUTHORIZED REP RESENTATIVE HAS ADMITTED THAT THE SAME CENTRALIZED AC SYSTEM WAS USED IN THE OFFICE PREMISES IN THE EARLIER YEAR. THEREFORE, IT WAS INCUMBENT UPON THE ASSESSEE TO EXPLAIN AND JUSTIFY THE EXPENSES ON ELECTRICITY CONSUMPTION BY CO-RELATING IT WITH THE MANUFACTURING OPERATIONS. OTHER THINGS REMAINING SA ME, THERE IS A DIRECT CO- RELATION BETWEEN THE CONSUMPTION OF ELECTRICITY AND QUANTUM OF MANUFACTURING ACTIVITY. THE ASSESSEE HAS FAILED TO EXPLAIN THE CO NSUMPTION OF ELECTRICITY9 BY PROVIDING ANY SUPPORTING EVIDENCE. MERELY BY STATIN G THAT CONSUMPTION OF ROUGH DIAMONDS HAS A MEAGER IMPACT ON THE OVERALL E LECTRICITY EXPENSES DOES NOT EXPLAIN THE ISSUE AT STAKE. WHEN THE CENTRALIZE D AC WAS IS IN USE BOTH THE YEARS, IT WAS INCUMBENT UPON THE ASSESSEE TO EXPLAI N THE CO-RELATION BETWEEN THE CONSUMPTION OF ROUGH DIAMONDS WITH ELECTRICITY EXPENSES. IN VIEW OF THIS, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AO. T HE AO HAS TAKEN A VERY REASONABLE SAND IN TREATING 50% OF THE ELECTRICITY EXPENSES EXCESSIVE AND NOT JUSTIFIED. THE DISALLOWANCE OF RS.7,63,792/- IS, TH EREFORE, CONFIRMED. AGGRIEVED, ASSESSEE CAME IN SECOND APPEAL BEFORE US . ITA NO.1958/AHD/2010 A.Y. 2006-07 M/S. I.P. PATEL & CO. V. ACIT, CIR-9, SRT PAGE 3 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEES CLAIM IN THIS YEAR REGARDING CONSUMPTION OF ELECTRICITY INCREASED IS ON ACCOUNT OF CENTRALIZED AC SYSTEM USED IN THE OFFICE PREMISES OF THE ASSESSEE AND INCREASE IN ELECTRICITY FROM RS.14,32,431/- IN THE PREVIOUS YEAR TO RS.15,25,945/- IS ON ACCOUNT O F USE OF CENTRALIZED AC SYSTEM DURING THE YEAR. THE ASSESSEE CLAIMED BEFORE US THA T THE ELECTRICITY EXPENSES CLAIMED AT RS.15,25,945/-INCLUDE THE EXPENSE OF ELE CTRICITY INCURRED FOR OFFICE PREMISES ALSO. WE FIND THAT THERE IS SLIGHT INCREAS E TO THE EXTENT OF RS.1,13,514/-, EVEN IF WE GO BY THE DECREASE IN CONSUMPTION OF ROU GH DIAMOND TO 74% AND THERE IS INCREASE IN ELECTRICITY EXPENSES AND THE ENTIRE DIS ALLOWANCE OF 50% CANNOT BE MADE. WE ARE OF THE VIEW THAT A REASONABLE DISALLOWANCE W ILL MEET THE ENDS OF JUSTICE, WHICH WE ASSUME AT RS.2 LAKH AND WE DIRECT THE ASSE SSING OFFICER TO RE-COMPUTE THE DISALLOWANCE AT RS.2 LAKH AND ACCORDINGLY ASSESS TH E INCOME. 5. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 01/10/2010 SD/- SD/- (D.C.AGRAWAL) (MAHAVI R SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 01/10/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-V, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD