The ACIT,S.K.Circle, Himatnagar V. Century Tiles Ltd., Himatnagar

ITA 2310/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76838 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2014
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 02-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2011
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: D K PARIKH
• Keywords: Gross profit estimation; Rejection of books of accounts; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 145

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 00 0 0 00 0 , , , , !' # $% !' # $% !' # $% !' # $%, , , , & & & & BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. 1058/AHD/2013 ASSESSMENT YEAR 2009-10 CENTURY TILES LTD., AT & POST GADHODA, TALOD ROAD, HIMATNAGAR. PAN: AACCC2531M VS JOINT COMMISSIONER OF INCOME TAX S.K. RANGE, HIMATNAGAR. '(/ APPELLANT *+'( / RESPONDENT ITA NO. 2310/AHD/2011 ASSESSMENT YEAR 2008-09 JOINT COMMISSIONER OF INCOME TAX S.K. RANGE, HIMATNAGAR. VS CENTURY TILES LTD., AT & POST GADHODA, TALOD ROAD, HIMATNAGAR. PAN: AACCC2531M REVENUE BY : SHRI K.C. MATHEWS, SR. DR ASSESSEE(S) BY : SHRI D.K. PARIKH, AR #!, - %/ // / DATE OF HEARING : 02/06/2014 ./0 - % / DATE OF PRONOUNCEMENT : 09/06/2014 1 1 1 1/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THE APPEAL IN ITA NO. 1058/AHD/2013 IS FILED BY T HE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VIII, AHMEDABAD DATED 28.01.2013 FOR ASSESSMENT YEAR 2009 -10. THE APPEAL IN ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 2 - ITA NO. 2310/AHD/2011 IS FILED BY THE REVENUE AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VIII, AHMEDABA D DATED 05.07.2011 FOR ASSESSMENT YEAR 2008-09. WE FIRST TAKE UP THE ASSESSEES APPEAL. 2. IN THE ASSESSEES APPEAL, THE ISSUE INVOLVED I S THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW A ND ON FACTS IN CONFIRMING THE ADDITION OF RS 60,71,567/- MADE BY T HE ASSESSING OFFICER BY ADOPTING GP AT 23.338% AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT THE ASSESSEE IS ENGAGED IN MANUFACTUR ING AND TRADING OF GLAZED TILES. THE SALES, GROSS AND NET PROFIT OF T HE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND EARLIER THREE YEARS WERE AS UNDER: ASST. YEAR TURNOVER GROSS PROFIT % NET PROFIT % 2006-07 18,48,38,000 4,25,89,875 23.04 97,98,942 5.30 2007-08 20,15,89,793 4,71,98,249 23.41 1,05,38,313 5.23 2008-09 22,85,54,986 5,37,41,942 23.51 1,20,07,955 5.25 2009-10 36,54,77,061 7,92,23,469 21.68 78,57,610 2.15 4. FURTHER, THE ASSESSING OFFICER REQUIRED THE ASS ESSEE TO FURNISH THE REASON FOR FALL IN GROSS PROFIT RATE AND NET PR OFIT RATE. THE ASSESSEE SUBMITTED THAT THE FALL IN THE GROSS PROFIT RATE AS COMPARED TO LAST YEAR BY 1.83% WAS ON ACCOUNT INCREASE IN THE COST OF RAW MA TERIALS, TRANSPORTATION EXPENSES AND VARIOUS OTHER MANUFACTURING EXPENSES. THE ASSESSING OFFICER FOUND THAT THE SELLING PRICE PER BOX OF GLAZED TILE S INCREASED DURING THE YEAR UNDER CONSIDERATION TO RS 220/- PER BOX COMPARED TO RS 130/- PER BOX IN THE IMMEDIATELY PRECEDING YEAR. HE, THEREFORE, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE FALL IN GROSS P ROFIT RATE WAS ON ACCOUNT OF ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 3 - INCREASE IN COST OF RAW MATERIALS, TRANSPORTATION E XPENSES AND VARIOUS OTHER MANUFACTURING EXPENSES. THE ASSESSING OFFICER FURT HER FOUND THAT THERE WAS SUBSTANTIAL VARIATION IN CONSUMPTION OF FUEL VIS-- VIS PRODUCTION. HE OBSERVED THAT IN ASSESSMENT YEAR 2008-09, GROSS PRO FIT ADDITION OF RS 27,20,045/- WAS MADE ON THE BASIS OF EXCESS CONSUMP TION OF FUEL AS COMPARED TO THE PRECEDING ASSESSMENT YEAR CONSIDERI NG THE 100% CAPACITY PRODUCTION OF 18,00,000 SQUARE METRES PER YEAR. HE NOTED THAT THIS YEAR, THE ASSESSEE HAS SHOWN TURNOVER OF RS 36.54 CRORES AGAINST RS 22.85 CRORES IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2008-0 9. HE FURTHER NOTED THAT IN THE PRESENT YEAR, THE ASSESSEE HAS SHOWN PR ODUCTION OF 17,57,601 METRIC TONNES OF TILES AND CONSUMPTION OF FUEL OF R S 6.50 CRORES. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE ASSESSEE HAD SHOWN PRODUCTION OF 17,11,343 SQUARE METRES OF TILES AND FUEL CONSUM PTION OF RS 5.39 CRORES. THEREFORE, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY ADDITION FOR SUPPRESSED PRODUCTION ON ACCOUN T OF EXCESS FUEL CONSUMPTION SHOULD NOT BE MADE IN THIS YEAR ALSO AS MADE IN THE PRECEDING ASSESSMENT YEAR. 5. IN REPLY TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT PRODUCTION CANNOT BE CALCULATED ON ESTIMATE SINCE T HE ASSESSEE MAINTAINS ALL BOOKS OF ACCOUNT WITH INVENTORY AND THEREFORE, ON A CCOUNT OF EXCESS CONSUMPTION OF FUEL COMPARED TO THE PREVIOUS YEAR W AS NOT SUFFICIENT REASON FOR ESTIMATING EXCESS PRODUCTION. IT WAS SUBMITTED THAT MANUFACTURING PROCESS OF CERAMIC GLAZED TILES WAS MOST IMPORTANT. THE ASSESSEE SUBMITTED THAT AFTER RECEIVING THE RAW MATERIALS AND CHECKING THE SAME, THE SAME IS STORED IN GO-DOWNS AND AS PER REQUIREMENT OF PRODUC TION, MATERIAL IS PUT ON CONVEYOR BELT WHICH IS SENT TO BALL MILL. AFTER TH IS, THE MATERIAL IS PUT FOR GRINDING PURPOSE. AFTER THIS PROCESS, IT IS PUT TO SLURRY PROCESSING WHERE IT MIXES WITH WATER. AFTERWARDS, IT IS EXTRACTED THRO UGH PIPE WHERE THE WATER COMPONENT IS SEPARATED AND THE DUST AND OTHER MATER IALS WHICH ARE NOT USEFUL FOR MANUFACTURING PROCESS ARE SEPARATED. AL L MACHINERY FOR ABOVE ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 4 - PROCESS RUNS BY ELECTRICITY ONLY. AFTER THE DRYING PROCESS IS OVER IN SYLO- CONTAINER, AGAIN THE GOODS ARE RETURNED THROUGH CON VEYOR BELT FOR PRESSING PURPOSE AND IN THIS PROCESS ALSO, ELECTRICITY IS US ED. AFTER THE PRESSING PROCESS, GOODS ARE PUT ON CONVEYOR BELT AND THE SAM E IS SENT TO HORIZONTAL DRYER WHERE THE REMAINING MOISTURE EVAPORATES. THE TEMPERATURE OF THIS HORIZONTAL DRYER IS 300 TO 400 DEGREES. FOR ALL TH IS PROCESS, FUEL AND ELECTRICITY IS USED. AFTERWARDS, IT IS SENT FOR PR INTING PURPOSE WHERE GLAZES, COLOUR AND CHEMICAL AS PER REQUIREMENT IS ADDED AND THE WORK OF DESIGN AS PER REQUIREMENT IS CARRIED OUT AND THE ENTIRE PROCE SS ALSO USES ELECTRICITY. AFTERWARDS, IT IS SENT TO KILN WHERE TEMPERATURE IS 1,210 DEGREES. THE SUPPLY IN THE KILN IS CONTINUOUS AND UNINTERRUPTED AND FUEL IS USED FOR THIS PROCESS ALSO. AFTER THE ABOVE PROCESS, POLISHING A ND SIZING PROCESS IS DONE THROUGH CONVEYOR BELT AND THE ASSESSEE HAS TO USE E LECTRICITY FOR THIS PURPOSE. THEREAFTER, SORTING OF FINISHED GOODS AS PER QUALITY LIKE PREMIUM, STANDARD, COMMERCIAL ETC. IS DONE. THEREAFTER, FIN ISHED GOODS ARE PACKED MANUALLY AND THE STRAPPING OF THE BOXES IS DONE ON MACHINE. CONSIDERING THE ABOVE MANUFACTURING PROCESS, IT WILL BE CLEAR T HAT MOST OF THE PLANT RUNS BY ELECTRICITY AND FUEL. IT WAS SUBMITTED THAT THE ASSESSEE HAD NO CONTROL OVER CONSUMPTION OF FUEL AND ELECTRICITY WHICH ARE SUPPLIED BY THE STATE GOVERNMENT AND CONSUMED AS REQUIRED AND THEREFORE, THE ASSESSEE HAS SHOWN TRUE AND CORRECT PRODUCTION DURING THE YEAR A ND THE CLAIM OF UNRECORDED PRODUCTION ACHIEVED BY THE ASSESSEE WAS NOT JUSTIFIED. IT WAS SUBMITTED THAT ON VERIFICATION OF OTHER MANUFACTURI NG EXPENSES, IT WILL BE SEEN THAT THEY HAVE NOT INCREASED. GROSS PROFIT HA D NOT DECREASED COMPARED TO EARLIER YEARS AND THAT THE ACT DOES NOT PROVIDE TO MAKE ADDITION ON ESTIMATE BASIS WITHOUT ANY COGENT EVIDE NCES OR MATERIALS FOUND. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT INCREASE IN COST OF FUEL WAS DUE TO INCREASE IN RATE ONLY AND THAT THE PRODUCTION HA S INCREASED TO 17.57 LAKH SQUARE METRES COMPARED TO 17.11 LAKH SQUARE METRES IN THE IMMEDIATELY PRECEDING YEAR WHEREAS THE CONSUMPTION OF FUEL DURI NG THE YEAR WAS 26,63,931.9 SCM AS AGAINST 30,32,645 SCM IN THE IMM EDIATELY PRECEDING ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 5 - YEAR AND THAT THE PRESUMPTION OF DEPARTMENT THAT PR ODUCTION IS ALWAYS 100% OF ITS CAPACITY OF 18 LAKH SQUARE METRES PER A NNUM AS AGAINST 97.61% SHOWN BY THE ASSESSEE IS NOT CORRECT. 6. THE ASSESSING OFFICER FURTHER OBSERVED THAT IT IS NOTICED FROM MONTH-WISE PRODUCTION IN WEIGHT INCLUDING THE BREAK AGE AS UNDER: MONTH PRODUCTION (KG.) BREKAGE (KG.) PERCENTAGE APRIL, 2008 3801440 12000 0.3156 MAY, 2008 3577917 4000 0.117 JUNE, 2008 3114172 9000 0.2890 JULY, 2008 3972212 8000 0.2013 AUGUST, 2008 2668075 67000 2.511 SEPTEMBER, 2008 2697080 42000 1.5572 OCTOBER, 2008 3533908 24000 0.6791 NOVEMBER, 2008 2285218 21000 0.9189 DECEMBER, 2008 2033349 10000 0.4917 JANUARY, 2009 3405945 12000 0.3523 FEBRUARY, 2009 3818693 2000 0.0523 MARCH, 2009 1088200 10000 0.9189 7. THE ASSESSEE WAS REQUIRED TO FURNISH THE REASON S FOR VARIATIONS IN BREAKAGE RANGING FROM 2000 KG. IN FEBRUARY 2009 TO 67,000 KG. IN AUGUST, 2008 AND TO FURNISH DOCUMENTARY EVIDENCE IN THIS REGARD, IF ANY. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DI D NOT GIVE ANY SPECIFIC REASON AND SIMPLY STATED THAT IT WAS NORMAL BREAKAG E IN THE LINE OF BUSINESS. 8. THE ASSESSING OFFICER FURTHER OBSERVED THAT ON EXAMINATION OF PROFIT AND LOSS ACCOUNT AND VARIOUS DETAILS, IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSES WHICH ARE HIGHLY EXC ESSIVE AS COMPARED TO LAST YEAR: ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 6 - A.Y. 2009-10 A.Y. 2008-09 (I) CONSUMABLE STORES & SPARES 1,85,44,245 55,49,505 (II) PAYMENT TO EMPLOYEES INCLUDING LABOUR 1,73,68,919 70,79,432 (III) REPAIRS & MAINTENANCE EXPENSES 1,28,93,965 1,43,568 9. HE NOTED THAT THE ASSESSEE WAS REQUIRED TO FURN ISH THE DETAILS OF SUCH EXPENSES, REASONS OF INCREASE IN EXPENSES AS C OMPARED TO LAST YEAR AND TO PRODUCE RELEVANT VOUCHERS OF ALL EXPENSES. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FURNISHED DETAILS OF THE EX PENSES REGARDING THE REPAIRS AND MAINTENANCE OF RS 1,28,93,965/-. THE A SSESSEE FURNISHED DETAILS IN THREE PARTS AS FOLLOWS: (I) RS 88,84,093/- (II) RS 9,66,340/- (III) RS 30,43,532/- RS 1,28,93,965/- 10. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE ADMITTED THAT EXPENDITURE OF RS 30,43,532/- IS CAPITAL EXPEN DITURE RELATED TO ERECTION OF DRYER PLANT. ACCORDINGLY, THE SAME WILL BE TR EATED AS CAPITAL EXPENDITURE ON WHICH DEPRECIATION OF RS 5,01,530/- AT THE RATE OF 15% WILL BE ALLOWED AND BALANCE RS 25,42,002/- WILL BE DISAL LOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER FURT HER OBSERVED THAT REGARDING THE INCREASE IN EXPENSES UNDER VARIOUS HE ADS MENTIONED ABOVE, THE ASSESSEE DID NOT GIVE ANY SPECIFIC REASON AND S IMPLY STATED THAT TURNOVER OF THE ASSESSEE HAS INCREASED FROM 22.85 C RORES IN IMMEDIATELY PRECEDING YEAR TO 36.54 CRORES IN THIS YEAR WHICH I S 60% MORE AS COMPARED TO LAST YEAR. THE ASSESSING OFFICER OBSERVED THAT THIS PLEA OF THE ASSESSEE DOES NOT CARRY WEIGHT AS SELLING PRICE PER BOX INCR EASED TO RS 220/- AS COMPARED TO RS 130/- PER BOX IN THE IMMEDIATELY PRE CEDING YEAR AND THAT ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 7 - THE NET QUANTITY SALE OF THE ASSESSEE IS LESS THAN THE IMMEDIATELY PRECEDING YEAR. ACCORDING TO HIM, THIS YEAR, SALE IS 16,58,7 79 SQUARE METRES WHICH WAS IN THE IMMEDIATELY PRECEDING YEAR 17,53,399 SQU ARE METRES. THE ASSESSING OFFICER OBSERVED THAT FROM THE ABOVE FACT S, IT IS APPARENT THAT THE BOOK RESULT DECLARED BY THE ASSESSEE ARE NOT SUBJEC T TO PROPER VERIFICATION AND ARE NOT CONCLUSIVE AND THEREFORE BY INVOKING PR OVISION OF SECTION 145(3) OF THE ACT, HE REJECTED THE BOOK RESULTS OF THE ASS ESSEE. HE FURTHER NOTED THAT THE GROSS PROFIT RATE OF 23.338% BEING THE AVE RAGE GROSS PROFIT RATE OF THE PRECEDING THREE YEARS SHOULD BE APPLIED AND APP LYING THE SAME TO THE SALES OF RS 36,54,77,061/-, HE WORKED OUT THE GROSS PROFIT AT RS 8,52,95,036/- AS AGAINST GROSS PROFIT OF RS 7,92,23 ,469/- SHOWN BY THE ASSESSEE AND THEREBY MADE ADDITION OF RS 60,71,567/ - TO THE INCOME OF THE ASSESSEE. 11. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 2.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSION OF THE APPELLANT CAREFULLY. THE AO HAS ESTIMATED TH E GROSS PROFIT (GP) OF THE APPELLANT COMPANY AS THE APPELLANT COMPANY H AS SHOWN ABNORMALLY LOW GP COMPARED TO EARLIER YEARS. THE AO HAS FOUND OUT THE DISCREPANCIES IN THE BOOKS OF ACCOUNTS AND ALSO REJECTED U/S 145 OF THE ACT AND ESTIMATED THE GROSS PROFIT OF THE ASSES SEE @ 23.338% BEING THE AVERAGE G.P RATE OF LAST 3 YEARS, AS AGAI NST G.P. RATE OF 21.68% 'SHOWN BY THE APPELLANT RESULTING IN AN ADDI TION OF RS.60,71,567/- WHICH IS ADDED TO THE INCOME OF THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT IT IS NOT POSSIBLE TO MAINTAIN GROSS PROFIT RATIO EVERY YEAR/THERE WAS SO MANY REASONS FOR INCR EASE OR DECREASE IN GROSS PROFIT RATIO I.E. COST OF RAW MATERIALS, M ARKET COMPETITION AND AVAILABILITY, CHANGE OF PRODUCT CONCEPT AND DESIGN, TERMS AND CONDITION OF SUPPLIERS. THE APPELLANT HAS SUBMITTED THAT THE PROVISION OF SECTION 145 DOES NOT APPLY IN THE CASE OF ASSESS EE AS AO HAS FAILED TO PROVE THE BASIC ASPECTS TO REJECT THE BOOKS OF A CCOUNTS U/S145 OF THE ACT. THE APPELLANT HAS SUBMITTED THAT IT HAS MA INTAINED AND REGULARLY EMPLOYED A METHOD OF ACCOUNTING AND BOOKS OF ACCOUNTS ARE AUDITED UNDER THE PROVISION OF COMPANIES/ACT AS WEL L AS INCOME TAX ACT, NO SIGNIFICANT OMISSION FOUND REGARDING COMPLE TED ACCOUNTS AND AO HAS NOT FOUND ANY DISCREPANCY IN BOOKS OF ACCOUN TS AS WELL AS NO COMMENT REGARDING CORRECTNESS AND COMPLETENESS OF T HE ACCOUNTS AND NO REASON HAS BEEN RECORDED BY THE AO TO THE UNACCE PTABILITY OF THE ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 8 - METHOD AND IRREGULARITY OF THE ACCOUNTS KEPT BY THE ASSESSEE. THE APPELLANT SUBMITTED THAT IT IS WELL SETTLED LAW THA T IN THE ABSENCE OF SUCH A FINDING RECORDED BY THE AUTHORITIES, THE BOO KS RESULT CANNOT BE IGNORED ONLY FOR THE REASON THAT THE ASSESSEE HAS M ADE EXPENSES WHICH ARE HIGHLY EXCESSIVE AS COMPARED TO LAST YEAR . 2.5 AFTER GOING THROUGH THE FACTS OF THE CASE, IT I S SEEN THAT AO HAS POINTED OUT MANY DEFECTS/DISCREPANCIES IN THE BOOKS OF THE ACCOUNTS OF THE APPELLANT. THE APPELLANT IS ENGAGED IN MANUFACT URING AND TRADING OF GLAZED TILES. THE SALE, GROSS AND NET PROFIT SHO WN BY THE APPELLANT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND EARLIER 3 YEARS ARE REPRODUCED AS UNDER: A.Y. TURNOVER GROSS PROFIT % NET PROFIT % 2006-07 18,48,38,000 4,25,89,875 23.04 97,98,942 5.30 2007-08 20,15,89,793 4,71,98,249 23.41 1,05,38,313 5.23 2008-09 22,85,54,986 5,37,41,942 23.51 1,20,07,955 5.25 2009-10 36,54,77,061 7,92,23,469 21.68 78,57,610 2.15 THE APPELLANT SUBMITTED THAT THE GROSS PROFIT RATE AS COMPARED TO LAST YEAR IS LESS BY 1.83% DUE TO INCREASE IN COST OF RA W MATERIALS, TRANSPORTATION EXPENSES AND VARIOUS MANUFACTURING E XPENSES ETC. THIS PLEA OF THE APPELLANT IS NOT ACCEPTABLE AS THE SELL ING PRICE PER BOX DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IS R S.220/- PER BOX AS COMPARED TO RS.130/- PER BOX LAST YEAR WHICH HAS AL SO BEEN POINTED OUT BY THE AO. THEREFORE, THE CONTENTION OF THE APP ELLANT DOES NOT CARRY ANY WEIGHT. 2.6 FROM MONTH TO MONTH OF THE YEAR UNDER APPEAL, IT IS OBSERVED THAT THERE IS SUBSTANTIAL VARIATION IN CONSUMPTION OF FUEL VIS--VIS PRODUCTION. IN THE ASSESSMENT YEAR 2008-09, G.P. AD DITION OF RS.27,20,045/- WAS MADE BY THE A.O. ON THE BASIS OF EXCESS CONSUMPTION OF FUEL, AS COMPARED TO THE PRECEDING A SSESSMENT YEAR, CONSIDERING THE 100% CAPACITY PRODUCTION OF 18 LAKH S SQ.MT. PER YEAR. THIS YEAR, THE ASSESSEE HAS SHOWN TURNOVER OF RS.36 .54 CRORES AS AGAINST RS.22.85 CRORES IN THE ASSESSMENT YEAR 2008 -09. THIS YEAR, IT HAS SHOWN PRODUCTION OF TILES OF 17,57,601 METRIC T ON AND CONSUMPTION OF FUEL OF RS.6.50 CRORES. IN THE PRECE DING ASSESSMENT YEAR, THE ASSESSEE HAD SHOWN PRODUCTION OF 17,11,34 3 SQ. MT. AND FUEL CONSUMPTION OF RS.5.39 CRORES. 2.7 THE APPELLANT WAS REQUESTED TO FURNISH THE REAS ONS OF VARIATION IN BREAKAGE RANGING FROM 200 KG. IN FEBRUARY, 2009 TO 67000 KG. IN AUGUST, 2008 AND FURNISH DOCUMENTARY EVIDENCES IN T HIS REGARD, IF ANY. THE APPELLANT HAS SUBMITTED THAT IT IS NOT POS SIBLE TO MAINTAIN DOCUMENTARY EVIDENCES OR RECORDED REASONS REGARDING BREAKAGE IN TILES INDUSTRIES; HOWEVER, ASSESSEE HAS MAINTAINED CONSUMPTION OF RAW MATERIALS IN QUANTITY VALUE AND PRODUCTION COMP ARED TO LAST ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 9 - MONTH OF THE YEAR. IN CERAMICS MANUFACTURING PROCES S THERE ARE DIVISIONS FOR MANUFACTURING OF TILES LIKE SPRAY DIR ER, KILN, POLISH UN- POLISH STOCK YARD, PACKING AND UNPACK STOCK YARD ET C. HENCE, VARIATION IN BREAKAGE DEPENDED UPON SITUATION, USE OF ITEMS A ND PRACTICAL PROBLEMS OCCURRED AT THE TIME OF MANUFACTURING PROC ESS, THEREFORE, THE VARIATION IN BREAKAGE DURING THE YEAR IS NOT A VALID REASON REGARDING REJECTING BOOKS OF ACCOUNTS OR FALL DOWN OF GROSS PROFIT. THIS EXPLANATION OF THE APPELLANT IS VERY GENERAL AND NO T SUBSTANTIATED BY ANY DOCUMENTARY EVIDENCE OR ANY SYSTEMATIC DETAIL A S TO HOW THE BREAKAGE IN ONE MONTH IS HIGHER AND NOT IN OTHER MO NTH IRRESPECTIVE OF THE PRODUCTION. THIS SHOWS THAT APPELLANT HAS NOT K EPT THE RECORD PROPERLY FROM WHICH THE DETAILS CAN BE PROCURED. IN ASSESSMENT ORDER PARA 3.5, THE AO HAS NOTED THE EXPENSES OF THIS YEAR WHICH ARE HIGHLY EXCESSIVE AS COMPARED TO LAST YEAR. THE DETAILS ARE AS UNDER: A.Y. 2009-10 A.Y. 2008-09 (I) CONSUMABLE STORES & SPARES 18544245 5549505 (II) PAYMENT TO EMPLOYEES INCLUDING LABOUR 17368919 7079432 (III) REPAIRS & MAINTENANCE 12893965 143568 THE APPELLANT HAS SUBMITTED THAT COMPARED TO PREVIO US YEAR CONSUMPTION OF RAW MATERIALS INCREASE IS 260%, IT I S SETTLED THAT THE CONSUMPTION OF STORES AND SPARES WAS LIABLE TO INCR EASE AND THEREFORE, INCREASE OF CONSUMPTION OF STORES & SPARES WAS REAS ONABLE COMPARED TO PREVIOUS YEAR. FURTHER, REPAIR AND MAINTENANCE W AS INCREASED COMPARED TO PREVIOUS YEAR DUE TO MACHINERY WAS LIAB LE TO MAINTENANCE AFTER 5 YEARS OF CONTINUED PRODUCTION. HOWEVER, THE ASSESSEE HAS CLAIMED CAPITAL EXPENSES OF RS.3043532 /- UNDER REPAIR AND MAINTENANCE HEAD AS REVENUE EXPENDITURE AND SAM E WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AFTER PROP ER VERIFICATION, OF BILLS / VOUCHERS ETC. BY AO. THE APPELLANT HAS SUBM ITTED THAT HE HAS MADE EXPENSES FOR PAYMENT TO EMPLOYEE OF RS.1736891 9/- WAS NOT EXCESSIVE BECAUSE OF ASSESSEE HAS HIRED SKILLED EMP LOYEES FOR GOOD PRODUCTION AND MARKETING AND THEREFORE ASSESSEE HAS ACHIEVED 60% OF HIGHER TURNOVER COMPARED TO PREVIOUS YEAR. THE APPE LLANT HAS GIVEN VERY GENERAL EXPLANATION REGARDING CONSUMABLE STORE S & SPARES AND PAYMENT TO EMPLOYEES INCLUDING LABOUR. THE PROCESS IS SAME AND THE INCREASE IN LABOUR IS MORE THAN 115% INCREASE WHICH APPELLANT HAS NOT JUSTIFIED WITH ANY DOCUMENTARY EVIDENCES AND SO IS THE CASE WITH CONSUMABLE STORES & SPARES. THE APPELLANT HAS SHOWN ABNORMAL EXPENSES COMPARED TO EARLIER YEARS. THESE EXPENSES CANNOT BE SIMPLY EXPLAINED AS THE APPELLANT HAS STATED THAT MARKET C ONDITION DEMANDED. THE EXPLANATION GIVEN BY THE APPELLANT IS NOT AT ALL CONVINCING AND AGAINST THE PRUDENCY OF THE MARKET I N THIS INDUSTRY. IT INDICATES TOWARDS THAT APPELLANT HAS INFLATED THE E XPENSES TO LOWER THE PROFIT DURING THE YEAR. ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 10 - 2.8 FROM ALL THE FACTS DISCUSSED ABOVE, IT IS APPAR ENT THAT THE BOOK RESULTS DECLARED BY THE APPELLANT ARE NOT SUBJECT T O PROPER VERIFICATION AND ARE NOT CONCLUSIVE AND THE PROVISIONS OF SEC. 1 45(3) ARE CLEARLY APPLICABLE IN THIS CASE. THE APPELLANT HAS SHOWN AB NORMAL EXPENSES COMPARED TO EARLIER YEARS. THESE EXPENSES CANNOT BE SIMPLY EXPLAINED AS THE APPELLANT HAS STATED THAT MARKET CONDITION D EMANDED. THE EXPLANATION GIVEN BY THE APPELLANT IS NOT AT ALL CO NVINCING AND AGAINST THE PRUDENCY OF THE MARKET IN THIS INDUSTRY. IT IND ICATES TOWARDS THAT APPELLANT HAS INFLATED THE EXPENSES TO LOWER THE PR OFIT DURING THE YEAR. THE GROSS PROFIT RATE AS COMPARED TO LAST YEAR IS L ESS BY 1.83% DUE TO INCREASE IN COST OF RAW MATERIALS, TRANSPORTATION E XPENSES AND VARIOUS MANUFACTURING EXPENSES ETC. THIS PLEA OF THE ASSESS EE IS NOT ACCEPTABLE AS THE SELLING PRICE PER BOX DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IS RS.220/- PER BOX AS COMPARED TO RS.130/- PER BOX LAST YEAR. THE APPELLANT HAS ALSO SUBMITTED THE COMPARABLE PROFIT RATIO OF OTHER TILES MANUFACTURING COMPANIES. THIS COMPARISON IS NOT CONCLUSIVE AS EVERY CASE HAS DIFFERENT SET OF FACTS AND SECONDLY, IN ALL THE COMPANY THERE IS NO SIGNIFICANT CHANGE OF PROFI T WHEREAS IN APPELLANTS CASE THE FALL IS ALMOST 60% COMPARED TO EARLIER YEAR. IT CAN BE SAID THAT EVEN IF REGULAR ADOPTION OF A METHOD O F ACCOUNTING IS THERE THE ANNUAL PROFITS CANNOT PROPERLY BE DEDUCED FROM THE METHOD EMPLOYED AND THERE ARE SIGNIFICANT OMISSION TO SHOW THE CORRECT EXPENSES. THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS AND REASONABLY ESTIMATED THE GROSS PROFIT OF THE ASSESS EE @ 23.338% BEING THE AVERAGE G.P RATE OF LAST 3 YEARS, AS AGAI NST G.P. RATE OF 21.68% SHOWN BY THE APPELLANT. 2.9. THE APPELLANT HAS ALSO CITED THE CASE LAWS IN THE CASE OF PANDIT BROS VS. CIT (1954) 20 ITR 159, (PUNJ RAM KUMAR BEN IPRASAD VS. ITO (1977) TAXATION 49 (6)-141, TRIMURTI SALT CO. VS. I TO (1981) TAXATION 63(6)-13, SHRI AMBIKAJI RICE MILLS VS. CIT (1990) 9 0 CTR (PAT) 127, RAZA TEXTILES LTD. VS. CIT (1972) 86 ITR 673 (ALL), NARSINGHDAS RAMAKISHAN PUNGALIYA V/S. ACIT, 272 ITR 467 RAJASTH AN, SHRI AMBIKAJI RICE MILLS VS. CIT (1990) 90 CTR (PAT) 127 AND OTHERS AS SUPRA. IN ALL THE CASES, THE HONBLE COURTS HAVE HE LD THAT THE AO CANNOT REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE TH E GP MERELY BECAUSE THE PROFITS WERE LOW. IT WAS ALSO HELD IN T HESE CASES THAT THE AO HAS TO ESTABLISH THE DEFECTS IN THE BOOKS OF ACC OUNTS. IN THE APPELLANT CASE THE AO HAS ESTABLISHED THAT HOW THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AS DISCUSSED SUPRA. IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. V/S. CIT 26 ITR 775 (SC) THE COURT HAS H ELD THAT ASSESSING OFFICER CANNOT ACT ON PURE GUESS. IN THE CASE OF T HE APPELLANT, IT IS NOT THE CASE OF PURE GUESS BUT THE AO HAS PROVED BOOK R ESULT OF THE APPELLANT ARE NOT RELIABLE FOR THE REASON DISCUSSED ABOVE. THEREFORE, NONE OF THE CASE LAWS CITED BY THE APPELLANT ARE CO MING TO HELP OF THE APPELLANT CAUSE AS THE FACTS AND CIRCUMSTANCES IN T HIS CASE IS ENTIRELY DIFFERENT AND BASED ON THE PURE ACCOUNTING REASON F OR NOT ACCEPTING THE RESULT DECLARED BY THE APPELLANT IN THE BOOKS O F ACCOUNTS DURING THE YEAR. IN THE CASE OF S.N. NAMASIVAYAM CHETTIAR VS. CIT 38 ITR 579 (SC) IT IS HELD THAT:- ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 11 - 'THE POWER TO COMPUTE PROFITS UNDER THE PROVISO TO SECTION 13 ARISES ONLY WHERE NO METHOD OF ACCOUNTING HAS BEEN REGULARLY EMPLOYED BY THE ASSESSEE AND WHERE THE METHOD EMPLO YED IS SUCH THAT THE INCOME, PROFITS AND GAINS CANNOT PROP ERLY BE DEDUCED THEREFROM. IT MEANS THAT THE METHOD ADOPTED BY THE ASSESSEE MUST PRIMA FACIE PREVAIL WHERE IT IS REGULARLY EMPLOYED, THOUGH THE I TO CAN RESORT TO THE PROVISO IF THE METHOD IS SUCH THAT TRUE, PROFITS CANNOT BE CORRECT LY DETERMINED THEREFROM. IN OTHER WORDS, EVEN IF THE ASSESSEE HAS REGULARLY EMPLOYED A METHOD OF ACCOUNTING IT CAN BE DISCARDED UNDER THE PROVISO IF THE METHOD DOES NOT SHOW CORRECT PROFITS OF THE YEAR'. IN VIEW OF ABOVE DISCUSSION, THE GP ESTIMATED BY TH E AO IS REASONABLE WHICH IS THE AVERAGE OF THE EARLIER YEARS AND THE S AME IS CONFIRMED. THE GROUND OF THE APPELLANT IS DISMISSED. 12. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE BESIDES RELYING ON HIS SUBMISSION BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS),ARGUED THAT ON THE BASIS OF CONSUMPTION OF FUEL AND ELECTR ICITY, THE PRODUCTION OF THE ASSESSEE CANNOT BE ESTIMATED AND ADDITION CANNOT BE MADE ON ACCOUNT OF SUPPRESSED PRODUCTION. FOR THIS, HE PLACED RELIANC E ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF ITO VS. PRAGATI FASHIONS RE PORTED IN (2011) 12 ITR 444 (AHD.) (TRIB.) WHEREIN IT WAS HELD THAT CLOTH CANNOT BE PROCESSED MERELY BY USING ELECTRICITY. IT ALSO REQUIRES CONS UMPTION OF VARIOUS DYES AND CHEMICALS AND ALSO USE OF MANPOWER. FOR ALL THESE FACTORS, NO ADVERSE FINDING IS GIVEN BY THE ASSESSING OFFICER. THUS, T HE CONSUMPTION OF INTERMEDIATE AND LABOUR BEHIND THIS IS SUFFICIENT P RODUCTION ACHIEVED BY THE ASSESSEE. CONSIDERING ALL THESE FACTORS, THERE IS NO CAUSE OF ADDITION AS MADE OUT BY THE ASSESSING OFFICER. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION FOR SUSTAINING THE ADDITION AS PROPOS ED BY THE ASSESSING OFFICER. FURTHER HE RELIED ON THE DECISION OF THIS TRIBUN AL IN THE CASE OF BHARUCH & SONS, SURAT VS. DEPARTMENT OF INCOME TAX FOR ASSESSMENT YEAR 2005-06 PASSED IN ITA NO. 2423/AHD/2008 ORDER DATED 26.10.2012, WHEREIN IT WAS HELD THAT FOR WORKING OUT THE SUPPRESSION OF PRODUCTION, THE ASSESSING OFFICER HAS RELIED ON THE RATIO OF CONSUM PTION OF ELECTRICITY AND GAS AS COMPARED BETWEEN THE MONTHS OF THE YEAR ON THE B ASIS OF WHICH ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 12 - CONSUMPTION IN THE MONTH OF MAY AND THE PRODUCTION ACHIEVED DURING THE SAME MONTH, THE ASSESSING OFFICER WORKED OUT ESTIMA TED PRODUCTION FOR THE REMAINING PART OF THE YEAR AND AFTER ADJUSTING THE PRODUCTION DISCLOSED BY THE ASSESSEE AND ALLOWING FOR 20% VARIATION, THE AS SESSING OFFICER WORKED OUT SUPPRESSED JOB WORK CHARGES RECEIVED BY THE ASS ESSEE. SINCE THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER WIT HOUT BRINGING ANY CONCRETE MATERIALS ON RECORD TO SHOW THAT ASSESSEE HAS RECEIVED JOB WORK CHARGES MORE THAN WHAT HAS BEEN RECORDED IN HIS BOO KS OF ACCOUNT, THE ADDITION CANNOT BE SUSTAINED. FURTHER, THE ASSESSI NG OFFICER HAS NOT EVEN MADE ANY INQUIRIES FROM THE PERSONS WHO HAVE MADE P AYMENTS TO THE ASSESSEE TO ASCERTAIN WHETHER OR NOT THERE HAS BEEN ANY SUPPRESSED PRODUCTION ON THE PART OF THE ASSESSEE. FURTHER, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISI ON OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. M/S. SANTRO TILES LIMITED FOR ASSESSMENT YEAR 2006-07 PASSED IN ITA NO. 3120/AHD/2008 ORDER DATED 22.03.2011 WHERE THE TRIBUNAL OBSERVED INDISPUTABLY THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOUNT AND NO DEFECTS HAVE BEEN POINTED O UT BY THE ASSESSING OFFICER IN THE PURCHASES OR SALES AND EVEN IN THE E XPENSES. THERE IS NO FINDING OR OPINION THAT THE RECORDS WERE INCORRECT OR INCOMPLETE OR THAT THE METHOD APPLIED WAS SUCH THAT THE INCOME COULD NOT B E DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSEE. WITHOUT POINT ING OUT ANY DEFECTS, BOOKS OF ACCOUNT CANNOT BE REJECTED UNLESS INGREDIE NTS OF PROVISIONS OF SECTION 145 OF THE ACT ARE FULFILLED. IN THE INSTA NT CASE, THERE ARE NO DEFECTS TILL IN THE BOOKS OF ACCOUNT NOR THERE IS A FINDING OR OPINION EITHER THAT THE RECORD WERE INCORRECT OR INCOMPLETE OR THAT THE MET HOD APPLIED WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOU NTS MAINTAINED BY THE ASSESSEE. THE TRIBUNAL FURTHER OBSERVED THAT THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. AMITBHAI GUNWANTBHAI 129 ITR 573 HELD THAT IF THERE WAS NO CHALLENGE TO THE TRANSACTION REPRESENTED IN THE BOOKS, THEN IT IS NOT OPEN TO REVENUE TO CONTEND THAT WHAT IS SHOWN BY TH E ENTRIES IS NOT THE REAL STATE OF AFFAIRS. SECONDLY, EVEN IF FOR SOME REASO N THE BOOKS ARE REJECTED IT ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 13 - IS NOT OPEN TO ASSESSING OFFICER TO MAKE ANY ADDITI ON ON ESTIMATE BASIS OR ON PURE GUESS WORK. THE BURDEN OF SHOWING THAT THE APPARENT STATE OF AFFAIRS IS NOT THE REAL ONE IS VERY HEAVY ON THE DE PARTMENT. (BEDI & CO. PVT. LTD. VS. CIT 144 ITR 352 (KARNATAKA) AFFIRMED BY TH E HONBLE SUPREME COURT IN 230 ITR 580. NO MATERIAL HAS BEEN PLACED BEFORE US TO DOUBT THE NATURE OF TRANSACTIONS RECORDED IN THE BOOKS AS MEN TIONED BY THE COMMISSIONER OF INCOME TAX (APPEALS). NO SPECIFIC DISCREPANCIES OR DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN P OINTED OUT NOR WAS ANY MATERIAL BROUGHT TO OUR NOTICE TO ESTABLISH THAT PU RCHASES WERE INFLATED OR RECEIPTS SUPPRESSED. IN THESE CIRCUMSTANCES, THERE WAS NO JUSTIFICATION FOR INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT ( VIKRAM PLASTICS 239 ITR 161 (GUJ.) AND ESTIMATING THE PROFITS. IN VIEW OF THE ABOVE FACTS SPECIALLY WHEN THERE IS NO MATERIAL BEFORE US TO TAKE A DIFFE RENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THERE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 13. THE DEPARTMENTAL REPRESENTATIVE FULLY JUSTIFIE D THE ORDER OF THE ASSESSING OFFICER. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF GLAZED TILES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DI SCLOSED GROSS PROFIT OF 21.68% WHICH WAS LESSER THAN THE GROSS PROFIT OF 23 .51% DISCLOSED IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD CON SUMABLE STORES AND SPARES, PAYMENT TO EMPLOYEES INCLUDING LABOUR AND R EPAIRS AND MAINTENANCE WERE DISPROPORTIONATELY HIGHER THAN THE EXPENSES UN DER THESE HEADS CLAIMED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER ON VERIFICATION OF THE EXPENSES UNDER THE HEADS FOU ND THAT EXPENDITURE OF RS ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 14 - 30,43,532/- DEBITED UNDER THE HEAD REPAIRS AND MAI NTENANCE WERE OF CAPITAL NATURE AND ACCORDINGLY MADE DISALLOWANCE OF THE SAME SEPARATELY. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EX PLANATION OF THE ASSESSEE IN RESPECT OF DECLINE IN GROSS PROFIT RATE AND THE REASONS ADVANCED BY THE ASSESSEE IN RESPECT OF INCREASE IN EXPENSES UNDER T HE ABOVE MENTIONED HEAD. THE ASSESSING OFFICER ALSO OBSERVED THAT THE BREAKAGE CLAIMED BY THE ASSESSEE ON MONTH TO MONTH BASIS WAS NOT IN THE SAM E PROPORTION AS PRODUCTION IN THOSE MONTHS. ACCORDING TO THE ASSES SING OFFICER, THE ASSESSEE COULD NOT BRING ANY MATERIAL TO SUBSTANTIA TE THE GENUINENESS OF THE BREAKAGE. BEING NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE IN RESPECT OF DECLINE IN THE RATE OF GROSS PROFIT, THE ASSESSING OFFICER REJECTED THE BOOK RESULTS OF THE ASSESSEE AND ESTIMATED ITS GROSS PROFIT AT THE RATE OF 23.338% WHICH WAS AVERAGE OF THE RATE OF GROSS PROF IT ACHIEVED BY THE ASSESSEE DURING THE PRECEDING THREE YEARS. THEREBY , ASSESSING OFFICER MADE A TRADING ADDITION OF RS 60,71,567/-. 15. ON APPEAL, THE COMMISSIONER OF INCOME TAX CONF IRMED THE ACTION OF THE ASSESSING OFFICER FOR THE VERY SAME R EASON. 16. WE FIND THAT IT IS AN ESTABLISHED POSITION OF LAW THAT THE RESULT DISCLOSED BY THE REGULARLY MAINTAINED BOOKS OF ACCO UNT CANNOT BE REJECTED UNLESS IT IS FOUND THAT THE BOOKS OF ACCOUNT MAINTA INED ARE EITHER INCOMPLETE OR UNRELIABLE OR METHOD OF ACCOUNTING EMPLOYED IS S UCH ON THE BASIS OF WHICH CORRECT PROFIT OF THE ASSESSEE CANNOT BE DEDU CED. 17. FURTHER, ON FINDING DEFECT IN A PARTICULAR ACC OUNT ONLY, THE EFFECT OF WHICH CAN BE SEPARATELY WORKED OUT OR ESTIMATED, THEN WHOLESALE REJECTION OF BOOKS OF ACCOUNT SHOULD NOT BE RESORTE D TO. 18. NOW COMING TO THE FACTS OF THE INSTANT CASE, W E FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE MAINTAINED REGULAR BOO KS OF ACCOUNT WHICH WERE ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 15 - DULY AUDITED AND THE STOCK REGISTER WAS ALSO DULY M AINTAINED BY THE ASSESSEE. 19. FURTHER, NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT ANY TRANSACTION MADE BY THE ASSESSEE WAS NOT RECORDED I N THE BOOKS OF ACCOUNT. 20. FURTHER, NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE WAS N OT A REGULAR OR CONSISTENT METHOD OR A METHOD FROM WHICH THE CORREC T PROFIT OF THE ASSESSEE COULD NOT BE DEDUCED. 21. FURTHER, APART FROM THE BREAKAGE, NO OTHER EXP ENSES ENTERED IN THE BOOKS OF ACCOUNT WERE FOUND TO BE NOT SUPPORTED BY PROPER VOUCHERS OR WERE NOT VERIFIABLE. 22. FURTHER, IN OUR CONSIDERED OPINION, DISPROPORT IONATE INCREASE IN EXPENSES UNDER ANY HEAD BY ITSELF DOES NOT EMPOWER THE REVENUE TO REJECT THE BOOK RESULTS. SUCH A SITUATION ONLY CREATES A DOUBT AND REQUIRES THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THE EXPENDITURE WITH CAUTION. HOWEVER, THE ASSESSING OFFICER CANNOT REJECT SUCH E XPENSES WITHOUT FINDING THAT ANY BOGUS OR NON-BUSINESS EXPENDITURE OR CAPIT AL EXPENDITURE HAS BEEN DEBITED THEREIN. 23. IN THE INSTANT CASE, WE FIND THAT THE ASSESSIN G OFFICER COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT ANY BOGUS EXPENDITURE OR NON- VERIFIABLE EXPENSES WERE DEBITED UNDER ANY HEAD OF EXPENSES. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE WHOLESAL E REJECTION OF BOOK RESULT IN THE INSTANT CASE WAS NOT WARRANTED. THE REASONS GIVEN BY THE LOWER AUTHORITIES IN THE INSTANT CASE FOR REJECTING THE B OOK RESULTS WAS INABILITY OF THE ASSESSEE TO PROPERLY EXPLAIN THE REASON FOR DEC LINE IN GROSS PROFIT FOR DISPROPORTIONATE INCREASE IN EXPENSES IN THREE HEAD S. IN OUR OPINION, THE ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 16 - ABOVE REASON COULD AT BEST PRESENT A CASE WHERE THE ASSESSING OFFICER OUGHT TO HAVE VERIFIED THE BOOKS WITH CAUTION AND MAKE DU E INQUIRIES BUT DOES NOT EMPOWER THE ASSESSING OFFICER TO REJECT THE BOOK RE SULTS. 24. IN RESPECT OF BREAKAGE, WE FIND THAT THE CHART PLACED AT PAGE 77 OF THE PAPER BOOK FILED BY THE ASSESSEE SHOWS THAT THE BREAKAGE CLAIMED DURING THE YEAR UNDER CONSIDERATION WORKED OUT TO 0 .61% OF THE TOTAL PRODUCTION WHICH COMPARES FAVOURABLY WITH THE BREAK AGE OF 1.22% ACCEPTED BY THE DEPARTMENT IN THE CASE OF THE ASSESSEE IN TH E ASSESSMENT YEAR 2007- 08 AND 1.08% ACCEPTED IN THE ASSESSMENT YEAR 2008-0 9. THUS, NO ADDITION IN RESPECT OF BREAKAGE CLAIMED IN THE YEAR UNDER CO NSIDERATION IS ALSO WARRANTED. IN THE ABOVE CIRCUMSTANCES, IN OUR CONS IDERED VIEW, THE ENTIRE ADDITION OF RS 60,71,567/- IS NOT SUSTAINABLE. WE, THEREFORE, DELETE THE ADDITION OF RS 60,71,567/- AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 25. NOW WE TAKE UP REVENUES APPEAL. THE FIRST GR OUND OF APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS 27,20,045/- MA DE ON ACCOUNT OF GROSS PROFIT ON UNACCOUNTED PRODUCTION. 26. THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAD TURNOVER OF RS 22,85,54,986/- AND GROSS PROFIT OF RS 5,37,41,942/- WHICH WORKS OUT TO 23.51% AGAINST 23.41% FOR THE IMMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER OBSERVED THAT ON GOING THROUGH THE DETAILS OF FUEL CONSUMPTION AND C ONSUMPTION OF RAW MATERIALS FOR FINANCIAL YEAR 2006-07 AND 2007-08, I T IS NOTICED THAT FUEL CONSUMPTION INCREASED ABNORMALLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION WHEREAS PRODUCTION DID NOT INCREASE P ROPORTIONATELY. HE OBSERVED THAT THE DETAILS ARE AS UNDER: ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 17 - FINANCIAL YEAR 2007-08 2006-07 FUEL CONSUMPTION RS 5,39,26,525/- RS 3,58,63,663/- CONSUMPTION OF RAW MATERIAL RS 3,18,21,550/- RS 3,53,93,340/- PRODUCTION OF TILES IN BOXES 17,11,343 SQ. MTS. 16,09,394 SQ. MTS. FROM THE ABOVE TABLE, THE ASSESSING OFFICER FOUND T HAT CONSUMPTION OF FUEL INCREASED APPROXIMATELY RS 2 CRORES WHEREAS CONSUMP TION OF RAW MATERIALS IS REDUCED IN FINANCIAL YEAR 2007-08. HE OBSERVED THAT BECAUSE FUEL IS CONSUMED FOR PRODUCTION OF TILES ONLY, QUANTITY OF TILES MANUFACTURED IN FINANCIAL YEAR 2007-08 MUST HAVE INCREASED PROPORTI ONATELY AS COMPARED TO FUEL BUT THE SAME HAS NOT HAPPENED IN THE CASE OF T HE ASSESSEE. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE REASONS FOR TH E SAME. HE OBSERVED THAT ON PROPORTIONATE BASIS THE PRODUCTION SHOULD H AVE BEEN 24,15,908 SQUARE METRES. HE NOTED THAT AGAINST PROPORTIONATE PRODUCTION OF 24,15,900 SQUARE METRES, THE ASSESSEE HAS MANUFACTURED 17,11, 343 SQUARE METRES OF TILES. IT SHOWS THE ASSESSEE HAS NOT ENTERED INTO THE BOOKS THE REMAINING PRODUCTION OF 8,06,514 SQUARE METRES OF TILES WHICH IS PRODUCTION ON ACCOUNT OF EXCESS CONSUMPTION OF FUEL. HE OBSERVED THAT IT SEEMS THAT THE EXCESS PRODUCTION HAS BEEN SOLD OUT OF BOOKS. HE ISSUED S HOW CAUSE NOTICE ON THE ASSESSEE REQUESTING HIM TO EXPLAIN WHY THE VALUE OF UNRECORDED PRODUCTION OF 8,06,514 SQUARE METRES OF TILES SHOULD NOT BE AD DED TO THE INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IN RESPONSE T O THIS SHOW CAUSE NOTICE, THE ASSESSEE EXPLAINED THAT PRODUCTION SHOU LD HAVE BEEN CALCULATED BY TAKING INTO CONSIDERATION THE QUANTITY DETAILS O F RAW MATERIALS CONSUMED INSTEAD OF VALUE. THE ASSESSEE WORKED OUT ITS PROD UCTION AT 17,63,930 SQUARE METRES WHEREAS AS PER ACCOUNTS IT HAS MANUFA CTURED ONLY 17,11,338 SQUARE METRES. THE ASSESSING OFFICER OBSERVED THAT AS PER ASSESSEES OWN CALCULATION ALSO, THE PRODUCTION IS SHORT BY 52,591 SQUARE METRES WHICH IS VALUED AT RS 68,36,830/-. THE ASSESSING OFFICER FU RTHER OBSERVED THAT FOR WORKING OUT ITS PRODUCTION IN SQUARE METRES, THE AS SESSEE TOOK INTO ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 18 - CONSIDERATION QUANTITY OF LNG CONSUMED ONLY AS IF T ILES ARE PRODUCED BY CONSUMING LNG FUEL ONLY. HE OBSERVED THAT AS PER A SSESSEES OWN REPLY, MOST OF THE PLANT IS RUN BY ELECTRICITY AND FUEL IS USED IN ONLY TWO STAGES OF PRODUCTION. THEREFORE, THE ASSESSING OFFICER HELD THAT WHILE WORKING OUT TOTAL PRODUCTION, TOTAL COST OF FUEL CONSUMED ONLY HAS TO BE TAKEN INTO CONSIDERATION WHICH IS RS 5,39,26,525/- IN ASSESSME NT YEAR 2008-09. HE, THEREFORE, REJECTED THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT IT IS NOT BASED ON ACTUAL FACTS. THE ASSESSEE FURTHER SU BMITTED THAT IN FINANCIAL YEAR 2007-08 BECAUSE OF CHANGE IN FORMULATION OF CL AY BODY AND RAW MATERIALS, KILN WAS RUN AT A HIGHER TEMPERATURE I.E . 1200 TO 1500 DEGREE CENTIGRADE AS COMPARED TO 1170 DEGREE CENTIGRADE IN FINANCIAL YEAR 2006- 07 AND THUS THE CONSUMPTION OF FUEL INCREASED. THE ASSESSING OFFICER OBSERVED THAT THIS ASPECT COULD NOT BE SUBSTANTIATE D BY DOCUMENTARY EVIDENCES AS NO DAY TO DAY REGISTER WAS MAINTAINED TO SHOW AT WHICH TEMPERATURE KILN WAS RUNNING AT A PARTICULAR TIME. HE OBSERVED THAT KILN IS GENERALLY RUN AT 1200 TO 1500 DEGREE CENTIGRADE. T HEREFORE, THERE IS NO FORCE IN ASSESSEES ARGUMENT THAT IT WAS RUNNING KI LN AT HIGHER TEMPERATURE BY 40 DEGREE CENTIGRADE. THE ASSESSEES ARGUMENT T HAT KILN WAS ALSO EMPTY RUN TO SOME EXTENT IS ALSO NOT ACCEPTABLE AS LAST Y EAR ALSO, SAME KILN WAS USED BY THE ASSESSEE AND KILN CANNOT BE FULLY LOADE D EVERY TIME. SAME OPERATIONAL ACTIVITIES ARE CARRIED ON IN KILN EVERY YEAR AS ASSESSEE IS MANUFACTURING TILES ONLY. THE ASSESSING OFFICER OB SERVED THAT FOR WORKING OUT THE SHORTFALL IN MANUFACTURE OF TILES BY 52591 SQUARE METRES ASSESSEE HAS TAKEN INTO CONSIDERATION ONLY QUANTITY OF LNG W HICH IS NOT CORRECT AS ALL FUEL CONSUMED SHOULD HAVE BEEN TAKEN INTO CONSIDERA TION. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS FILE D ACKNOWLEDGEMENT FROM MINISTER OF COMMERCE & INDUSTRY DATED 24.03.2004 IN WHICH IT IS MENTIONED THAT THE ASSESSEES MANUFACTURING CAPACITY IS 18 LA KH SQUARE METRES AND IN HIS REPLY FILED ON 30.11.2010 ALSO, THE ASSESSEE HA S TAKEN GROUND THAT ITS PRODUCTION CAPACITY IS STILL 18 LAKH SQUARE METRES AND ARGUED THAT PRODUCTION OF TILES MORE THAN CAPACITY IS NOT POSSIBLE. THE A SSESSING OFFICER OBSERVED ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 19 - THAT THIS ARGUMENT OF THE ASSESSEE WAS REASONABLE A ND ACCEPTABLE ALSO. HE OBSERVED THAT ANYWAY TOTAL PRODUCTION CANNOT EXCEED THE PRODUCTION CAPACITY OF THE MANUFACTURING UNITS. IN VIEW OF TH ESE ASPECTS, TOTAL UNACCOUNTED PRODUCTION IS CALCULATED BY TAKING INTO CONSIDERATION OVERALL PRODUCTION CAPACITY OF THE UNIT WHICH IS 18 LAKH SQ UARE METRES PER ANNUM. THIS WAY, TOTAL EXCESS PRODUCTION IS WORKED OUT AS UNDER: 18,00,000 17,11,343 = 88657 SQUARE METRES HE OBSERVED THAT AVERAGE SALE PRICE PER SQUARE METR E IN THE YEAR UNDER CONSIDERATION WAS RS 130.50 AND THEREFORE, UNACCOUN TED PRODUCTION IS WORKED OUT AT RS 1,15,69,738/- BY APPLYING THE SAID RATE. HE FURTHER OBSERVED THAT FOR MANUFACTURING UNACCOUNTED PRODUCT ION, THE ASSESSEE MUST HAVE INCURRED UNACCOUNTED EXPENSES REGARDING RAW MA TERIALS ALSO AND THEREFORE, GROSS PROFIT IS TAXED ON THIS UNACCOUNTE D SALE PRICE AS CONCEALED INCOME IN THE HANDS OF THE ASSESSEE. HE OBSERVED T HAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEES GROSS PROFIT IS 23.51% AND THEREFORE, TOTAL GROSS PROFIT AT THE RATE OF 23.51% I.E. RS 27 ,20,045/- IS TAXED AS CONCEALED INCOME IN THE HANDS OF THE ASSESSEE FOR T HE YEAR UNDER CONSIDERATION. 27. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE ADDITION. 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF GLAZED TILES. THE ASSESSING OFFICER OBSERVED THAT THE GROSS PROFIT DI SCLOSED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ON SALES OF RS 22,85,54,986/- WAS 23.51% AS COMPARED TO 23.41% IN THE IMMEDIATELY PRE CEDING ASSESSMENT YEAR. FURTHER, THE ASSESSING OFFICER OBSERVED THAT THE EXPENSES OF THE ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 20 - ASSESSEE UNDER THE HEAD FUEL CONSUMPTION WERE RS 5,39,26,525/- WHEREAS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR SUCH E XPENSES WERE RS 3,58,63,663/- ONLY. THE PRODUCTION SHOWN BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION WAS 17,11,343 SQUARE METRES AS COMPARED TO 16,09,343 SQUARE METRES IN THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR. ON THE BASIS OF THIS INCREASE IN THE FUEL CONSUMPTI ON, THE ASSESSING OFFICER OPINED THAT THE ASSESSEE MUST HAVE PRODUCED MORE QU ANTITY OF TILES. THE TOTAL ANNUAL INSTALLED PRODUCTION CAPACITY OF THE A SSESSEE WAS 18 LAKH SQUARE METRES. THE ASSESSING OFFICER THEREFORE, ASSUMED T HAT THE ASSESSEE MADE MORE PRODUCTION BY (18,00,000 17,11,343) = 88,657 SQUARE METRES OF TILES WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUN T AND APPLYING GROSS PROFIT RATE ON THE SALE VALUE OF SUCH EXCESS PRODUC TION, MADE ADDITION OF RS 27,20,045/- TO THE INCOME OF THE ASSESSEE AS PROFIT ON UNDISCLOSED SALES. 29. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE ABOVE ADDITION BY OBSERVING THAT THERE MAY BE V ARIOUS REASONS FOR VARIANCE IN FUEL CONSUMPTION ON MANUFACTURING OF GL AZED TILES, THE COMPARISON OF ABSOLUTE VALUE OF FUEL CONSUMPTION IS NOT PROPER AND CAN GIVE ABSURD RESULT, THERE WAS A CHANGE IN THE PROCESS OF MANUFACTURING DURING THE YEAR UNDER CONSIDERATION, INSOFAR AS THE ASSESS EE DURING THE YEAR CHANGED LPG FUEL TO LNG FUEL FOR ITS MANUFACTURING AND LASTLY, NO SPECIFIC DEFECT IN THE AUDITED ACCOUNTS OF THE ASSESSEE WAS POINTED OUT AND IN ABSENCE OF THE SAME, THE ADDITION MADE WAS ONLY ON THE BAIS OF CONJECTURES AND SURMISES. 30. THE DEPARTMENTAL REPRESENTATIVE BEFORE US SUPP ORTED THE ORDER OF THE ASSESSING OFFICER. THE ONLY SPECIFIC CONTEN TION OF THE DEPARTMENTAL REPRESENTATIVE BEFORE US WAS THAT THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT HEARING ITSELF ADMITTED TO HAVE PRODUCED 17,63,930 SQUARE METRES OF GLAZED TILES AND THEREFORE, THE COMMISSIO NER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING THE ENTIRE ADDITION. ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 21 - 31. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE STRONGLY OBJECTED TO THE ABOVE ARGUMENT AN D SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE SIMPLY PRESENTED A CALCULATION BEFORE THE ASSESSING OFFICER SHOWING ESTIMATED PRODUCTION ON THE BASIS OF CONSUMPTION OF FUEL AND ON DIFFERENT B ASIS. THE ASSESSEE NEVER ADMITTED BEFORE THE ASSESSING OFFICER TO HAVE ACTUA LLY PRODUCED 17,63,930 SQUARE METRES OF GLAZED TILES DURING THE YEAR UNDER CONSIDERATION. 32. WE FIND THAT THE COMMISSIONER OF INCOME TAX (A PPEALS) HAS RECORDED IN THIS RESPECT IN ITS ORDER THAT THE ASSE SSEE CONTENDED BEFORE HIM THAT THE ASSESSEE NEVER ADMITTED THAT THE PROJECTED PRODUCTION WORKED OUT ON THE BASIS OF COMPARATIVE QUANTITATIVE CONSUMPTIO N OF FUEL WAS ACTUAL PRODUCTION OF THE YEAR. 33. WE FIND THAT NO MATERIAL WAS BROUGHT BEFORE US BY THE REVENUE TO SHOW THAT THE ASSESSEE ADMITTED AT ANY TIME THAT ITS ACTUAL PRODUCTION DURING THE YEAR WAS 17,63,930 SQUARE METRES AND NOT 17,11,343 SQUARE METRES AS RECORDED IN THE AUDITED BOOKS OF ACCOUNT. THUS, WE DO NOT FIND ANY FORCE IN THE ABOVE ARGUMENT OF THE DEPARTMENTAL REPRESENTATIVE. 34. NO MATERIAL WAS BROUGHT BEFORE US TO CONTROVER T THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE EFF ECT THAT THE QUANTITY OF FUEL CONSUMPTION MAY VARY IN MANUFACTURING OF GLAZE D TILES FROM ONE PERIOD TO OTHER PERIOD FOR VARIOUS REASONS AND THE COMPARI SON OF FUEL CONSUMPTION IN ABSOLUTE TERMS AS AGAINST QUANTITY IS IMPROPER, THE MANUFACTURING PROCESS OF THE ASSESSEE WITH REGARD TO THE NATURE OF FUEL U SED WAS CHANGED DURING THE YEAR. MOREOVER, WE FIND THAT NO SPECIFIC DEFEC T IN THE CORRECTNESS AND COMPLETENESS OF THE AUDITED ACCOUNTS OF THE ASSESSE E COULD BE BROUGHT ON RECORD BY THE REVENUE. ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 22 - 35. IN ABSENCE OF THE SAME, IN OUR CONSIDERED VIEW , IT WAS NOT OPEN TO THE REVENUE TO BRUSH ASIDE THE RESULT DISCLOSED FROM SUCH BOOKS OF ACCOUNT. WE FIND THAT ABSOLUTELY NO MATERIAL WAS B ROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE ACTUALLY PRODUCED QUANTITY MORE THAN WHAT HAS BEEN DISCLOSED IN THE BOOKS OF ACCOUNT OR MADE ANY SALE WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. IN THE CIRCU MSTANCES, IN OUR CONSIDERED VIEW, VARIATION IN THE AMOUNT OF CONSUMP TION OF FUEL COULD HAVE BEEN A GROUND FOR CAREFUL SCRUTINIZING OF THE FACTS OF THE CASE, BUT IT BY ITSELF DOES NOT EMPOWER THE ASSESSING OFFICER TO ASSUME SO ME UNDISCLOSED PRODUCTION AND THEREBY MAKE ADDITION TO THE RESULT DISCLOSED BY THE REGULARLY MAINTAINED BOOKS OF ACCOUNT. WE, THEREFO RE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS) WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL OF THE RE VENUE IS DISMISSED. 36. GROUND NO. 2 IN THE REVENUES APPEAL IS DIRECT ED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) D ELETING THE ADDITION OF RS 1,34,569/- MADE ON ACCOUNT OF ADDITIONAL DEPRECA TION ON ELECTRIC INSTALLATION. 37. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEPRECIATION AT THE RATE OF 15% ON ELECTRIC INSTALLATIONS WHICH WERE PART AND PARCEL O F PLANT AND MACHINERY OF THE ASSESSEE. THE ASSESSING OFFICER ALLOWED DEPREC IATION AT THE RATE OF 10% TO THE ASSESSEE ON THE ELECTRIC INSTALLATIONS ON TH E GROUND THAT AS PER INCOME TAX RULES, DEPRECIATION ON ELECTRIC INSTALLA TIONS IS ALLOWABLE AT THE RATE OF 10% ONLY FOR ASSESSMENT YEAR 2008-09. THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOWING THE DECISION OF T HE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF MADHU INDUSTRIES LIMITE D VS. ITO 132 TTJ 233 AND THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF DCIT VS. DATACRAFT INDIA LIMITED 40 SOT 295 HELD THAT WH ERE ELECTRIC INSTALLATIONS ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 23 - WERE PART OF PLANT AND MACHINERY, THE ASSESSEE WAS ENTITLED TO DEPRECIATION AT THE RATE APPLICABLE TO PLANT AND MACHINERY AND N OT ELECTRIC INSTALLATIONS AND ALLOWED THE APPEAL OF THE ASSESSEE. THUS, HE D ELETED THE DISALLOWANCE OF RS 1,34,519/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DEPRECIATION. 38. WE FIND THAT THE DEPARTMENTAL REPRESENTATIVE C OULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS). HE COULD NOT CITE ANY CONTRARY DECISION S TO THE ONE ON WHICH THE COMMISSIONER OF INCOME TAX (APPEALS) RELIED WHILE A LLOWING THE CLAIM FOR DEPRECIATION ON ELECTRICAL INSTALLATION AT THE RATE APPLICABLE TO PLANT AND MACHINERY TO THE ASSESSEE. HENCE, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH I S CONFIRMED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 39. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON MONDAY, THE 9 TH OF JUNE, 2014 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 09/06/2014 GHANSHYAM MAURYA, SR. P.S. ITA NOS. 1058/AHD/2013 & 2310/AHD/2011 CENTURY TILES LTD. FOR AYS 2008-09 & 2009-10 - 24 - TRUE COPY 1 - *%2 320% 1 - *%2 320% 1 - *%2 320% 1 - *%2 320%/ COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. *+'( / THE RESPONDENT. 3. '' % #4 / CONCERNED CIT 4. #4() / THE CIT(A)-III, AHMEDABAD 5. 2!$7 *% , , / DR, ITAT, AHMEDABAD 6. 78 9, / GUARD FILE. 1# 1# 1# 1# / BY ORDER, : :: :/ // / '; '; '; '; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD