Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 6887 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-09-2017
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
Not Allotted
Next Hearing Date
09-02-2017
Assessment Year
2010-2011
Appeal Filed On
22-03-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR.B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO.292/CHD/2016 ASSESSMENT YEAR: 2010-11 M/S AARTI STRIPS PVT. LTD. VS. JCIT MANDI, GOBINDGARH MANDI GOBINDGARH PAN NO. AAFCA2837D ITA NO.250/CHD/2016 ASSESSMENT YEAR: 2010-11 THE ITO VS. M/S AARTI STRIPS PVT. LTD. WARD-2, MANDI GOBINDGARH MANDI GOBINDGARH (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ANIL KHANNA REVENUE BY : SH. RAVI SARANGAL DATE OF HEARING : 27/07/2017 DATE OF PRONOUNCEMENT : 07/09/2017 ORDER PER BENCH BOTH THESE APPEAL HAS BEEN FILED BY THE ASSESSEE AN D THE REVENUE AGAINST THE COMMON ORDER OF LD. CIT(A), PATIALA DT. 04/01/2016. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF C ASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN PARTLY UPHOLDING THE VALIDIT Y OF THE IMPUGNED ASSESSMENT ORDER FRAMED UNDER SECTION 143(3). 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.2,42,34,842 /-TO THE EXTENT OF RS. 1,09,71,422/-MADE ON ACCOUNT OF UNACCOUNTED INVESTM ENT IN UNACCOUNTED PRODUCTION. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN ESTIMATING WITHOUT ANY BASIS THE TOTAL UND ISCLOSED INVESTMENT IN RESPECT OF UNACCOUNTED PRODUCTION TO HALF OF THAT E STIMATED BY THE AO ON CONSIDERATIONS LIKE CREDIT PURCHASE/SALE, WHICH ARE NOT RELEVANT FOR ADDITION U/S 69/69B, IGNORING THE FACT BASED COMPUT ATION OF REASONABLE HOLDING PERIOD COMPUTED BY THE AO IN THE ASSESSMENT ORDER. 3. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE AO RESTORED. 4. THE BRIEF FACTS RELATING TO THE ISSUES UNDER CON SIDERATION ARE THAT THE ASSESSEE COMPANY IS A STEEL RE-ROLLING MIL L ENGAGED IN 2 MANUFACTURING OF IRON AND STEEL PRODUCTS VIZ STRUCT URAL STEEL LIKE ANGLES, CHANNELS, FLATS, JOISTS, BEAMS ETC. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESS EE TO FURNISH DETAILS OF DAILY PRODUCTION OF FINISHED GOODS AS WE LL AS THE DETAILS OF THE MANUFACTURING PROCESS INVOLVED. THE ASSESSING O FFICER FURTHER OBSERVED THAT THE AMOUNT OF ELECTRICITY CONSUMED WA S DIRECTLY RELATED TO THE PRODUCTION OF FINISHED GOODS. IN ORD ER 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 ASSESSI NG OFFICER ANALYZED THE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE P RODUCTION OF FINISHED GOODS AND OBSERVED THAT THERE WERE WIDE VA RIATION IN RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODUCED DURING THE YEAR. HE OBSERVED THAT THE ELE CTRICITY CONSUMPTION PMT OF FINISHED GOODS VARIES FROM 64.32 UNITS TO 114.06 UNITS WHILE THE AVERAGE FOR THE ENTIRE YEAR IS 84.1 6 UNITS. HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTRIC UNITS CONSUMED WERE VERY LOW WHEREAS FINISHED GOODS PRODUCED WERE VERY HIGH GIVI NG A VERY LOW VALUE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINI SHED GOODS, WHEREAS ON SOME 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 UN IT OF FINISHED GOODS. HE FURTHER OBSERVED THAT EVEN ON SOME DAYS T HOUGH THERE WAS ELECTRICITY CONSUMPTION YET NO PRODUCTION WAS S HOWN. HE FURTHER NOTED THAT OTHERWISE ON OTHER DAYS, THERE WAS ALSO A BALANCE AND CONSISTENCY IN CONSUMPTION OF ELECTRIC UNITS VIS-A- VIS PRODUCTION OF FINISHED GOODS. HE, THEREFORE, OBSERVED THAT IT IND ICATED THAT THE DAILY PRODUCTION RECORDED BY THE ASSESSEE OF THE FI NISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED T HAT THE DATA RELATING TO THE DAILY PRODUCTION HAD BEEN MAINTAINE D AS PER ACTUAL PRODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE AS SESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT O N VARIOUS FACTORS AS DETAILED IN HIS REPLY WHICH HAS BEEN REP RODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASS ESSING OFFICER, HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY OF THE ASSESSEE. HE ULTIMATELY HELD THAT THE ASSESSEE COMPANY WAS INVOL VED IN UNACCOUNTED PRODUCTION OF FINISHED GOODS WHICH RESU LTED IN UNACCOUNTED SALES AND PURCHASES. HE, THEREFORE, HEL D THAT THE SALE 3 AND PURCHASE FIGURES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT AND HE ACCORDINGLY REJECTED THE BOOKS O F ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AND PROCE EDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THEREAFTER ESTIMATED THE INCOME OF THE ASSESSEE ON THE BASIS OF ELECTRIC UNITS CONSUMED FOR 12 MONTHS AS PER CHART REPRODUCED IN THE ASSESSMENT ORDER. HE COMPARED THE SAME WITH THA T SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE UNACCOUNTED PRODUCTION FOR EACH MONTH. THEREAFTER, ON THE BASIS OF AVERAGE SALES RATE, THE VALUE OF TOTAL UNACCOUNTED PRODUCTION WAS ESTIMATED IN MONETARY TERMS AND THEN ADOPTING THE GROSS PROFIT R ATE SHOWN BY THE ASSESSEE, THE UNACCOUNTED PROFIT OUT OF THE UNA CCOUNTED PRODUCTION WAS WORKED OUT. SECONDLY, THE PEAK UNACC OUNTED PRODUCTION FOR THE RELEVANT MONTH WAS DETERMINED AN D BY MULTIPLYING THE AVERAGE SALE RATE OF FINISHED GOODS , THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THE ASSESSI NG OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INVESTMEN T OF THE ASSESSEE IN THE UNACCOUNTED PRODUCTION AND PROFIT THEREON AT RS. 2,42,34,842/- AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). TH E LD. CIT(A) AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE HELD THAT AN AMOUNT OF RS. 1,09,71,422/- MAY BE TREATED AS UNACCOUNTED INVESTMENTS AND PROFIT THEREON. 6. THE REVENUE FILED APPEAL BEFORE US FOR THE AMOUN T OF RELIEF OF RS. 1,32,63,420/- GRANTED BY THE CIT(A) AND THE ASS ESSEE FILED APPEAL FOR THE AMOUNT OF RS. 1,09,71,422/-. 7. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES. 8. IT WAS ALSO BROUGHT TO THE NOTICE THAT SUBSEQUE NT TO THE PASSING OF THE ABOVE STATED IMPUGNED ASSESSMENT ORD ER, A DETAILED STUDY WAS CARRIED OUT BY A COMMITTEE HEADED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE, MANDI, GOBINDGAR H 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. 4 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. 9. LD. COUNSEL FOR THE ASSESSEE, RELYING UPON THE R EPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA ARGUED THAT HE WAS COVERED ON THE ISSUE OF PRODUCTION AS DECIDED BY THE COMMITTEE. THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRICITY PER MET RIC TON OF FINISHED GOODS PRODUCED FROM THE AVERAGE WORKED OUT ON YEARL Y BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVER SE COGNIZANCE. HE ACCORDINGLY ARGUED THAT SINCE PURSUANT TO THE RE PORT OF THE COMMITTEE, THE ASSESSING OFFICERS HAVE BEEN ALREADY FOLLOWING THESE NORMS WHILE MAKING THE ASSESSMENT IN SIMILAR CASES AND IN SAME SET OF CIRCUMSTANCES AND HAS ACCEPTED THE BOOKS RESULTS SHOWN BY THE DIFFERENT ASSESSES. THE LD. AR HAS SUBMITTED VIDE L ETTER DT. 01/05/2017 THAT CASES INVOLVING SIMILAR ISSUE HAVE BEEN REMANDED TO THE RESPECTIVE ITOS FOR REASSESSMENT OF INCOME BAS ED ON THE COMMITTEE REPORT, AND REQUESTED THAT HIS CASE MAY A LSO BE REMANDED BACK FOR REASSESSMENT TO THE CONCERNED ITO . 9.1 THE ASSESSEE FURTHER SUBMITTED VIDE LETTER DT. 01/05/2017 THAT THE ADDITION ON ACCOUNT OF DISALLOWANCE UNDER SECTI ON 40(A)(3) OF RS. 5,33,953/- IS NOT BEING PRESSED. THE ASSESSEE A LSO SUBMITTED THAT THE ADDITION MADE ON ACCOUNT OF CALCULATION OF DEPR ECIATION HAS BEEN SETTLED BY THE DEPARTMENT BY PASSING ORDER UND ER SECTION 154 OF THE INCOME TAX ACT. HENCE IT MAY ALSO BE TREATED AS SETTLED. 10. THIS TRIBUNAL VIDE ITS COMMON ORDER DATED 14.2 .2017, PASSED IN THE CASE OF M/S MODI OIL & GENERAL MILL, MANDI GOBI NDGRH AND OTHERS IN ITA NO. 149/CHD/2016 AND IN ITA NO. 662/C HD/2016IN THE CASE OF M/S. UNIPEARL ALLOYS, OBSERVING THAT CONSEQ UENT TO THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMI SSIONER OF INCOME TAX, PATIALA CERTAIN INTERNAL GUIDELINES REG ARDING ACCEPTABILITY OF VARIATION UPTO 15% HAVE BEEN ISSUE D AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE I N SUBSEQUENT YEARS BY THE ASSESSING OFFICER, HAS REMANDED THE MA TTER TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE IS SUE AFRESH IN 5 ACCORDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GU IDELINES ISSUED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA. 11. IN OUR VIEW THIS MATTER NEEDS TO BE RESTORED TO THE ASSESSING OFFICER IN THE PRESENT APPEALS, AS THE LD. CIT(A) D IDNT HAVE THE BENEFIT OF COMMITTEE REPORT WHILE DECIDING THE ABOV E APPEALS AS IN OTHER SIMILAR CASES WHERE IN THE INTERNAL GUIDELINE S OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOM E TAX, PATIALA WERE FOLLOWED. THE COMMITTEE SO CONSTITUTED WAS A B ROAD 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 E XPERTS OF THE NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLOG Y (NISST) AND THE INDUSTRY REPRESENTATIVES. THE DEPARTMENT HAS ACCEPT ED THE VARIATION OF 15% IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTEE. 12. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES A ND SINCE THE FACTS AND ISSUE INVOLVED IN ALL THE OTHER CAPTIONED APPEALS ARE IDENTICAL, AND IN VIEW OF OUR FINDINGS GIVEN ABOVE, FOLLOWING THE PRINCIPLE OF CONSISTENCY LAID DOWN BY THE HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RIETA BISCUITS C O. (P) LTD [2009] 309 ITR 154 (P&H)WHERE IN IT WAS HELD THAT THE BOOK RE SULTS SHOWN BY THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION N EED TO BE ACCEPTED, AS WELL. 13. WE THEREFORE, SET ASIDE THE ACTION OF THE ASSES SING OFFICER IN REJECTING THE BOOKS OF ACCOUNT AND WITH DIRECTIONS TO FOLLOW THE GUIDELINES FORMULATED BY THE COMMITTEE CONSTITUTED BY THE PR. CIT(A), PATIALA AND THE INTERNAL GUIDELINES ISSUED REGARDING ACCEPTABILITY OF VARIATION UPTO 15%. THE ASSESSING OFFICER SHALL GIVE REASONABLE, SUFFICIENT OPPORTUNITY OF BEING HEARD T O THE ASSESSEE AND ASSESSES SHALL BE AT LIBERTY TO RAISE ANY CONTE NTION BEFORE ASSESSING OFFICER FOR COMPLETION OF THE ASSESSMENT IN ACCORDANCE WITH LAW. 14. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED 15. IN THE RESULT, CROSS APPEALS ARE HEREBY ALLOWED FOR STATISTICAL PURPOSES. 6 16. IN THE RESULT BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07/09/2017 SD/- SD/- (DIVA SINGH) (B.R.R.KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07/09/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR
