ACIT, Bulandshahr V. M/s. Bulandshahr Roller Flour Mills (P) Ltd., Bulandshahr

ITA 3384/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74029 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANURADHA MISHRA
• Keywords: Unexplained cash credit; Capital asset converted into stock in trade; Depreciation; Business expenditure; Opportunity of being heard; Commercial expediency
• Section: 142(1)

Judgement Text

ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 3384/DEL/2010 ASSESSMENT YEAR : 2007-08 ASSTT.COMMISSIONER OF INCOME TAX, VS M/S BULAND SHAHR ROLLER FLOUR CIRCLE-BULANDSHAHR (U.P.) MILLS (P) LTD., 22-FATEH GANJ, BULANDSHAHR. (APPELLANT) (RESPOND ENT) APPELLANT BY: SMT. ANURADHA MISHRA, SR. DR RESPONDENT BY : SHRI K. SAMPATH O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX(A), MEERUT DATED 28.04.2 010 IN APPEAL NO. 227/09-10 FOR AY 2007-08. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.LT.(APPEALS) HAS ERRED IN NOT CONSI DERING THE MERITS OF THE CASE AND IN DELETING THE ADDITION OF RS. 3,58,15,876/- ON ACCOUNT OF EXCESS CONSUMPTION OF D IESEL WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE A.O. AND ONLY UPHOLDING THE ADDITION OF RS. 1,20,00 0/-ON ACCOUNT OF PERSONAL USE OF DIESEL IN THE DIESEL CAR OWNED BY THE ASSESSEE. 2. THAT THE LD. CIT(A) IGNORED THE REMAND REPORT SUBMITTED BY THE A.O. THE ADDITION IN QUESTION WAS WELL ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 2 REASONED AND WELL BASED, WHILE THE ADDITIONAL EVIDE NCES BROUGHT BEFORE THE LD. CIT(A) WERE TOTALLY IRRELEVA NT FOR DECIDING THE ISSUE. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. C.I.T(APPEALS) WAS JUSTIFIED IN GRANTING RELIEF BY DISCARDING THE COGENT REASON BY THE A.O. AND SUMMAR ILY ACCEPTING ARGUMENTS OF THE ASSESSEE WITHOUT GIVING ANY REASON. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. C.I.T. (APPEALS) WAS JUSTIFIED IN GRANTING RELI EF WITHOUT APPRECIATING THE COMPARATIVE FIGURES SUPPLIED BY TH E ASSESSEE ITSELF OF EARLIER YEARS WHERE THE CONSUMPT ION OF POWER AND FUEL WAS 4.02%, AND 7.92% IN ASSESSMENT Y EARS 2005-06 AND 2006-07 RESPECTIVELY AND 74.97% FOR ASSESSMENT YEAR UNDER CONSIDERATION. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS) MAY BE SET-ASIDE AND THAT OF THE A.O. RESTORED. 3. BRIEF FACTS GIVING RISE TO THIS APPEAL ARE THA T THE ASSESSEE FILED ITS RETURN THROUGH E-FILING DECLARING AN INCOME OF RS.13,58,62 6 AND THE CASE WAS SELECTED FOR SCRUTINY. CONSEQUENTLY, A NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AND ANOTHER NOTICE U/ S 142(1) OF THE ACT WERE DULY SERVED ON THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, FROM THE COMPARATIVE CHARTS OF SALES AND GROSS PROFIT WITH M ANUFACTURING DETAILS FURNISHED BY THE ASSESSEE, IT WAS FOUND THAT THERE WAS A NOTICEABLE SHARP INCREASE IN THE CONSUMPTION OF POWER AND FUEL, MAIN LY DIESEL AS COMPARED TO THE EARLIER YEARS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN EXCESS ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 3 CONSUMPTION OF DIESEL. THE ASSESSEE EXPLAINED THAT IN ADDITION TO THE MANUFACTURING OF ATTA, MAIDA, SUJI FROM WHEAT, THE ASSESSEE COMPANY ALSO PROCESSED CHOKER INTO SUPER FINE CHOKER WHICH REQUI RES ANOTHER COMPLETE MANUFACTURING PROCESS AS IN GRINDING OF WHEAT WITH THE USE OF SPECIAL EQUIPMENT I.E. SIX BODY CHAKKI RUN ROUND THE YEAR F OR WHICH THE ASSESSEE COMPANY PURCHASED TWO GENERATORS OF 150 KVA AND 160 KVA. THESE GENERATORS REQUIRE 40 LTRS PER HOUR AND 60 LTRS PER HOUR OF DIESEL RESPECTIVELY. THE ASSESSEE FURTHER EXPLAINED THAT DURING THE YEAR TWO BOILERS WERE ALSO INSTALLED ON 17.04.2006 FOR WASHING OF WHEAT WHICH REQUIRES ABOUT 30 LTR PER BOILER PER HOUR OF DIESEL AND THE ASSESSEE SUBMITTE D A CHART TO JUSTIFY THE CONSUMPTION STATING THEREIN THAT ROLLER MILL CONSUM PTION CONTINUED DAY AND NIGHT FOR 24 HOURS THROUGHOUT 300 DAYS DURING THE R ELEVANT PERIOD OF TIME. THE ASSESSEE ALSO SUBMITTED BEFORE THE ASSESSING OF FICER THAT THE PERCENTAGE OF CONSUMPTION OF DIESEL SHOULD BE WORKED OUT IN TE RMS OF QUANTITY OF WHEAT THRUSH AND THE ASSESSEE ALSO FURNISHED A CHART SHOW ING CONSUMPTION OF WHEAT AND DIESEL. 4. THE SUBMISSIONS OF THE ASSESSEE DATED 19.11.200 9 ARE AS UNDER:- WITH REFERENCE TO YOUR NOTICE ISSUED U/S 142(1)/14 3(3) DATED 03.11.2009 I SUBMIT AS UNDER:- 1. DETAIL OF PURCHASE/SALE OF COMMODITIES WHICH WERE T RADED DURING THE YEAR IN TERMS OF QUANTITY WAS FURNISHED AT PAGE 85 OF WRITTEN REPLY DATED 18.08.2008. THE QUANTITATIVE DETAIL OF PURCHASE OF ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 4 WHEAT, CONSUMPTION AND ITEM PRODUCED ON CRUSHING OF WHEAT/SALE IT TERMS OF QUANTITY WERE FURNISHED AT PAGE 84 OF T HE LETTER MENTIONED ABOVE. DETAIL OF ITEM WISE SALE OF ITEM TRADED IN TERMS OF QUANTITY AND VALUE ARE BEING FURNISHED HERE AT P AGE 1. DETAIL OF SALE OF ITEM MANUFACTURED IN TERMS OF VALUE IS B EING RUSNIEHD AT PAGE 2. 2. BESIDES THE MANUFACTURING OF ATTA, MAIDA, SUJI FROM WHEAT, DURING THE YEAR THE ASSESSEE COMPANY ALSO PROCESSED THE C HOKER INTO SUPER FINE CHOKER WHICH REQUIRES THE COMPLETE MAN UFACTURING PROCESS AS IN GRINDING OF WHEAT. TO CARRY ON THE M ANUFACTURING PROCESS FROM CHOKER TO SUPER FINE CHOKER 6 BODY (CH AKKI) RUN ROUND THE YEAR FOR WHICH ASSESSEE COMPANY PURCHASED TWO GENERATORS OF 125 KVA & 160 KVA AND TO RUN THE GENE RATOR OF 125 KVA AND 160 KVA. H S D WAS REQUIRED 40 LTRS PER HOUR AND 60 LTRS PER HOUR RESPECTIVELY. ONE BOILER TO PRODUCE TO STEAM FOR WASHING OF WHEAT WAS ALSO INSTALLED ON 17.01.2006 WHEREIN DIESEL WAS THE CONS UMED SEPARATELY. THE CONSUMPTION OF HSD ALSO INCREASED DUE TO INTERR UPTION OF ELECTRIC SUPPLY. TO SUMMARIZE THE CAPACITY OF GENE RATORS THEIR FUEL CONSUMPTION IN GENERATORS AND BOILERS ARE AS U NDER:- GENERATORS CAPACITY CONSUMPTION OF HSD PER HOUR IN LTRS NORMAL DAYS NORMAL WORKING HOURS NORMAL CONSUMPTION OF DIESEL (LTRS) (I) 380 KVA 105 LTRS 300 24 756000 (II) 160 KVA 60 LTRS 300 24 432000 (III)125 KVA 40 LTRS 300 24 288000 (IV) 2 BOILERS 61 LTRS 300 24 439200 TOTAL 1915200 AS PER CHART INDICATED ABOVE TOTAL CONSUMPTION OF D IESEL WORK OUT OF 1915200 LTRS WHEREAS TOTAL DIESEL CONSUMED 1903045 LTRS OPENING STOCK NIL ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 5 PURCHASED 1926000 LESS WASTAGE 12300 CLOSING 10655 2 2955 1903045 BILLS OF ALL PURCHASE OF DIESEL AND ELECTRICITY ARE VOUCHED AND THEIR PAYMENTS WERE MADE THROUGH CHEQUE/DRAFTS. THE FIGURES INDICATED IN YOUR NOTICE ARE NOT CORREC T AS THE CONSUMPTION OF POWER AND FUEL WERE CALCULATED V IS A VIS THE VALUE OF WHEAT CONSUMED WHEREAS THE POWER A ND FUEL IS RELATED WITH CRUSHING OF WHEAT. SECONDLY, THE PROCESS OF CRUSHING OF WHEAT HAS BEEN CHANGED AS THE COMPANY PURCHASED TWO BOILERS FOR MANUFACTURING STEAM SUED FOR WASHING OF WHEAT. ONE BOILER PURCHASED IN F.Y. 2005-06 ON 17.03.06 (COPY OF PURCHASE BILL ENCLOSED HEREWITH) AND ANOTHER BOILER S PURCHASED ON 04.05.06 (PHOTOCOPY APPEARING AT PAGE 94 OF WRITTEN REPLY DATED 18.05.09), THESE BOILERS RUN THROUGHOUT THE YEAR FOR MANUFACTURING OF STEAM USED IN WASHING OF WHEAT. IN PRECEDING YEAR, THE COMPANY WA S NOT USING THIS PROCESS. THIS PROCESS WAS NECESSARY AS DEMANDED BY PURCHASERS WHO ARE USING ATTA AND MAIDA IN MANUFACTURING OF BAKERY. THIRDLY THIS YEAR SUPER FINE CHOKER MANUFACTURED WH ICH REQUIRED SIMILAR MANUFACTURING PROCESS. FOURTHLY ON PERUSAL OF CHARTS ENCLOSED HEREWITH SUP PLY OF ELECTRICITY WAS NEITHER ENSURED NOR REGULAR, THE REFORE ELECTRICITY CONSUMPTION REDUCED AND UTILIZATION OF GENERATORS WAS INCREASED. SINCE THE REGULAR ELECTRICITY SUPPLY WAS NOT AVAILA BLE, THEREFORE TWO GENERATORS WERE PURCHASED AND CONSUMPTION OF DIESEL INCREASED. THE ABOVE ALL FACTORS EFFECTED THE CONSUMPTION OF D IESEL. ALL PURCHASES ARE VOUCHED, PURCHASED FROM INDIAN OI L ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 6 CORP AND BHARAT OIL CORP TO WHOM ALL PAYMENTS WERE MADE THROUGH DRAFTS. UNDER THE CIRCUMSTANCES ENUMERATED ABOVE, THE DISALLOWANCE OF GENERATOR EXPENSES IS HYPOTHETICAL AND IMAGINARY. DETAIL OF CRUSHING OF WHEAT, CONSUMPTION OF DIESEL IN TERM OF QUANTITY, VALUE. ELECTRICITY EXPENSES AS RE QUIRED BY YOU VIDE LETTER DATED 16.11.2009. 5. THE ASSESSING OFFICER REJECTED THE EXPLANATION O F THE ASSESSEE AND OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE EXCESS CONSUMPTION OF DIESEL AND THE ASSESSING OFFICER GAVE A FINDING THA T THE ASSESSEE HAS CLAIMED EXCESS CONSUMPTION OF DIESEL TO THE TUNE OF 12,17,3 40 LTRS VALUING RS. 3,59,35,876/- AND THE ASSESSING OFFICER DISALLOWED AND ADDED THE SAME AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. THE AB OVE SUBMISSIONS AND EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE ASS ESSING OFFICER WITH FOLLOWING OBSERVATIONS AND FINDINGS:- THE EXPLANATION FURNISHED BY THE LD. C.A. OF THE ASSESSEE IS NOT DIGESTIBLE DUE TO FOLLOWING REASONS : DEPRECIATION CHART FURNISHED BY THE ASSESSEE SHOWS THAT FOLLOWING ADDITIONS WERE MADE DURING THE YEAR: I) A MOBILE PHONE WAS PURCHASED AFTER 30.09.2006 FOR RS.17,735/-. II) ADDITION IN PLANT & MACHINERY FOR RS.32,170/- . III) ADDITION IN GENERATOR FOR RS.1 ,97,500/-. ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 7 PHOTOCOPY OF THE GENERATORS PURCHASED HAS BEEN FURNISHED WHICH IS HAND WRITTEN HAVING NO COMPLETE ADDRESS OF THE SELLER IS PLACED ON RECORDS. FURTHER THERE IS NO EVIDENCE AS TO HOW MUCH DIESEL MAY BE CONSUME D IN THESE GENERATOR'S OR BOILERS. THE THEORY HAS BEEN GENERATED THAT THIS YEAR SUPERFINE BRAN HAS BEEN PRODUCED OUT OF THE GENERAL BRAN AND FURTHER CLAIMED THAT 66,207.04 QUINTALS OF SUPE RFINE BRAN WAS SOLD FOR RS.6,03,38,004/- GIVING RATE OF RS.911.35/QUINTAL WHILE ATTA HAS BEEN SOLD AT THE R ATE OF RS.1,106.12/QUINTAL, SUJI AT THE RATE OF RS.1,288.30/QUINTAL AND MAIDA AT THE RATE OF RS.1,204.30/QUINTAL. ONE CAN HARDLY BELIEVE THAT TH IS CHOKER SAID TO BE SUPERFINE BRAN WOULD HAVE BEEN SO LD AT THE RATE OF RS.911.35/QUINTAL, WHILE THE CHOKER PRO DUCED WAS SOLD AT THE RATE OF RS.653.44/QUINTAL. ALL THIS CHOKER/SUPERFINE BRAN HAS BEEN SOLD ON CASH BASIS A ND THEREFORE FIGURES OF SALE PRICE ARE NOT RELIABLE. A LL THIS THEORY HAS BEEN MADE TO PROVE THE QUANTITY OF DIESE L CONSUMED. 2. COMPARATIVE CHART OF MANUFACTURING EXPENSES AND OTHER EXPENSES HAS BEEN FURNISHED SHOW THAT EXPENSE S ON WAGES AND SALARIES THIS YEAR AMOUNTING TO RS.7,24,4 90/- AND IN THE PRECEDING YEAR RS.6,61,280/-WAS MADE. HA D THE COMPANY BE RUN THROUGHOUT 24 HOURS IN THREE SHI FTS DURING ENTIRE YEAR FOR 300 DAYS, THE EXPENSES OF WA GES AND SALARY WOULD HAVE GONE THREE TIMES, BUT THE SAM E IS NOT AS ABOVE. IT IS EVIDENT FROM THE ABOVE FIGURES. AS NO ONE WILL WORK WITHOUT WAGES OR EXTRA WAGES. THE CONSUMPTION OF DIESEL CONSUMED THEREFORE SHOWN FOR JUSTIFICATION IS ALSO NOT PROVED AS THE SAME IS ALS O BASED THAT FLOUR MILL RUN THROUGHOUT 24 HOURS IN THE WHOL E YEAR. THE CONSUMPTION OF DIESEL SHOWN FOR 125KVA AT 40LTRS/HR AND FOR GENERATOR OF 160KVA AT THE RATE O F 60LTRS/HR. HAS ALSO BEEN SHOWN EXCESSIVE AS NORMAL CONSUMPTION OF ABOVE GENERATORS IS 22-25LTRS/HR FOR A GENERATOR OF 125KVA AND APPROXIMATELY 30LTRS/HR FOR A GENERATOR OF 160KVA. SIMILARLY A GENERATOR OF 380KV A ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 8 MAY CONSUME APPROX. 70LTRS/HR OF DIESEL. IN THIS WA Y AS PER ABOVE WORKING THE CONSUMPTION OF DIESEL IF ALL THE THREE GENERATORS RUNS AT A TIME THEN CONSUMPTION WO ULD BE 25+30+70=125LTRS/HR AND FOR 8 HOURS IT WILL BE 1000LTRS I.E. FOR 300 DAYS IT WOULD BE 300X1000=3,00,000LTRS. ANYHOW IF IT IS THOUGHT THAT GENERATORS ARE OLD THEN FURTHER ALLOWING A MARGIN O F 10% THE CONSUMPTION WOULD BE 3,30,000LTRS AGAINST ASSESSEE'S CLAIM OF 19,15,200LTRS. THE ASSESSEE HAS PURCHASED THE DIESEL AT THE RATE OF RS.29.52/- AND ACCORDINGLY THE COST OF 3,30,000 LTRS OF DIESEL WOU LD BE RS.97,41,6001-. 3. IF WE TAKE THE CONSUMPTION RATIO FROM THE ABOVE MENTIONED CHART IN TERMS OF DIESEL % CONSUMED IN TE RMS OF LITERS IN THE RATIO OF WHEAT CRUSHED, THEN AVERA GE OF THE PERCENTAGE FOR PRECEDING TWO YEARS AND THIS YEA R, THE SAME ARRIVES AT 23.62+120.32+1777.72 DIVIDED BY 3= 640.55%. THEN FOR CRUSHING WHEAT WEIGHING 107049.45QUINTALS QUANTITY OF DIESEL AT THE PERCENT AGE OF 640.55% REQUIRED WOULD BE 6,85,705.25LTRS, WHILE TH E ASSESSEE HAS SHOWN CONSUMPTION OF 19,03,045LTRS OF DIESEL. 4. WHILE WORKING THE QUANTUM OF DIESEL CONSUMED, THIS FACT CANNOT BE IGNORED THAT THE ABOVE FLOUR MILL HA S ALSO CONSUMED ELECTRICITY WORTH RS.14,17,7301-. INFORMA TION WAS OBTAINED FROM THE ELECTRICITY DEPARTMENT WHO INFORMED THAT THE ABOVE FLOUR MILL HAS BEEN SANCTIO NED 210KVA OF ELECTRICITY. BECAUSE THE FLOUR MILL HAS CONSUMED BOTH ELECTRICITY AND DIESEL IT WOULD BE FA IR AND JUST TO TAKE CONSUMPTION OF DIESEL TO BE 6,85,705.2 5LTRS IN VIEW OF THE FACT, THAT ASSESSEE HAS CLAIMED, THI S YEAR HE HAS ALSO MADE SUPERFINE BRAN TO EARN MORE PROFIT AN D STEAM WASHING OF THE WHEAT WAS ALSO DONE. THE ASSES SEE HAS SHOWN 19,03,045LTRS CONSUMPTION OF DIESEL WHILE THE CONSUMPTION OF DIESEL ABOVE HAS BEEN WORKED OUT TO BE 6,85,705.25LTRS TO BE FAIR AND JUST AND HENCE 12,17,340LTRS OF EXCESS DIESEL SHOWN TO HAVE BEEN CONSUMED. JUST ONE CANNOT DIGEST SOMEONE SAYING THA T HE ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 9 HAS PREPARED ONE KG OF PUDDING BY USING 100KGS OF S UGAR OR 100KGS OF RICE OR 100KGS OF MILK, IN THE SAME WA Y AFTER GOING THROUGH THE CONSUMPTION OF DIESEL AND QUANTIT Y OF WHEAT CRUSHED DIESEL TO THE EXTENT SHOWN TO HAVE BE EN CONSUMED IS NOT BELIEVABLE. THEREFORE I HOLD THAT ASSESSEE HAS CLAIMED EXCESS CONSUMPTION OF DIESEL T O THE TUNE OF 12,17,340LTRS VALUING RS.3,59,35,876/- (12,17,340LTRS X RS29.52=RS.3,59,35,876/-). ACCORDINGLY THE SAME IS DISALLOWED AND ADDED TO THE INCOME RETURNED BY THE ASSESSEE. 6. THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE TH E COMMISSIONER OF INCOME TAX(A) WHICH WAS ALLOWED BY OBSERVING THAT T HE ASSESSEE HAS PURCHASED BILLS WHICH CONFIRM THE PURCHASE OF DIESE L UNDER SUPERVISION OF VARIOUS PETROLEUM AUTHORITIES AND THE SUPPLIES MADE TO THE ASSESSEES TANKER UNDER THE EARTH AND, THEREFORE, THERE WAS A ZERO PO SSIBILITY TO SELL THE DIESEL IN THE OPEN MARKET. THE COMMISSIONER OF INCOME TAX (A) ALSO OBSERVED THAT THE ASSESSEE HAS SHOWN LOG BOOK RELATING TO THE CON SUMPTION OF DIESEL IN THE CASE LAWS RELIED BY THE ASSESSEE WHICH ALSO SUPPORT THE CASE OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX(A) ALSO HELD THAT TH E ASSESSING OFFICER HAS IGNORED THE FACT THAT IN THE EARLIER YEAR, TOTA L LOAD OF ELECTRICITY WAS 210 KVA AND, THEREFORE, THE ASSESSEE WAS DEPENDENT UPON GENERATOR ONLY. THE COMMISSIONER OF INCOME TAX(A) ALSO HELD THAT THE EX PERT REPORT TO JUSTIFY THE EXCESSIVE CONSUMPTION OF DIESEL WAS ALSO NOT CO NSIDERED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER ALSO IG NORED THE FACT THAT THE ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 10 SALE AND PURCHASE OF FINAL STOCK OF THE ASSESSEE WA S ALSO EXAMINED BY THE TRADE TAX AUTHORITY AND STOCK OF DIESEL WAS ALSO EX AMINED BY THE DISTRICT SUPPLY AUTHORITY. 7. THE COMMISSIONER OF INCOME TAX(A) ALLOWED THE AP PEAL OF THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- 6.7. DECISION & REASONS THEREFOR: I HAVE GONE THROUGH THE ORDER OF THE AO, THE SUBMISSIONS OF THE AR AND THE FACTS ON RECORD CAREF ULLY. BEFORE GOING INTO THE MERITS, I FIND IT IMPORTANT T O OBSERVE THAT THE AO IN HIS REMAND REPORT HAS HARPED ON THE POINT THAT SUFFICIENT AND REASONABLE OPPORTUNIT IES WERE GIVEN DURING THE ASSESSMENT PROCEEDINGS AND, THEREF ORE, FRESH EVIDENCES SHOULD NOT BE ENTERTAINED. THE APPE LLANT HAS NOWHERE DENIED IT IN ITS WRITTEN SUBMISSIONS. T HE AO HAS NOT EVEN POINTED OUT AS TO WHICH PIECE OF DOCUM ENT HAS BEEN TREATED BY HIM AS A SO-CALLED FRESH EVIDENCE. HE WAS, IN ANY CASE, CLEARLY DIRECTED TO MAKE ENQUIRIES ON THE FRESH ARGUMENTS RAISED. FACTS ON RECORD SUGGEST THAT THE CHANGE IN THE MANUFACTURING PROCESS AND DETAILS REGARDING THE OPENING STOCK, PURCHASES AND SALES WERE DULY EXPLAI NED DURING THE ASSESSMENT PROCEEDINGS BY THE APPELLANT. A COPY OF EXPERT'S OPINION AND THE SALES-TAX ORDER WE RE FURNISHED DURING APPELLATE PROCEEDINGS ONLY TO EXPL AIN THE CASE MORE CLEARLY. THE AO EXAMINED THE ENTIRE BOOKS OF ACCOUNTS DURING THE ASSESSMENT PROCEEDINGS. THE COP Y OF EXPERT'S OPINION AND THE SALES-TAX ORDER ONLY FURTH ER SUBSTANTIATE THOSE FACTS EMANATING FROM THE BOOKS O F ACCOUNTS. THESE DO NOT CHANGE THE FACTS OF THE CASE IN MATERIAL TERMS. APPLICATION OF RULE 46A, THEREFORE, LOSES MEANING IN VIEW OF THE OVERRIDING POWERS CONFERRED UPON THE CIT(A) BY VIRTUE OF SECTION 250(4) OF THE INCOM E-TAX ACT, 1961. ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 11 ON A PERUSAL OF THE TOTALITY OF FACTS, CERTAIN UNDISPUTED AND CERTAIN DISPUTED POINTS EMERGE WHICH COULD BE SUMMARIZED AS UNDER: 6.7.1. UNDISPUTED POINTS : I. THAT THE ASSESSEE HAS MAINTAINED COMPLETE BOOK O F ACCOUNT INCLUDING BILLS, VOUCHERS, STOCK REGISTER A ND LOG BOOK AND WAGES REGISTER AND PRODUCED BEFORE THE A.O . II. THAT THE A.O. HAS GIVEN PROPER AND REASONABLE OPPORTUNITY OF BEING HEARD AND A.O. HAS PASSED THE ORDER AFTER MAKING ALL THE POSSIBLE ENQUIRY. III. THAT AS PER ASSESSMENT ORDER AND REMAND REPO RT THE A.O. HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT. IV. THAT WITHOUT ANY DOUBT THE ASSESSEE HAS MADE P URCHASE OF DIESEL FROM M/S BHARAT PETROLEUM CORP. LTD. FOR A SUM OF RS.5,68,58,808/-, AND THE TOTAL SALE AMOUNTS TO RS.36,70,60,940/-. THE A.O. AND S.T.O. HAVE NOT MAD E ANY DISPUTE ABOUT THE SALE, PURCHASE, OPENING STOCK AND CLOSING STOCK. V. THAT THE G.P. RATE OF THE YEAR UNDER CONSIDERATION SHOT UP FROM 2.28 TO 3.03%. VI. THAT IN THE PREVIOUS YEAR ELECTRICITY LOAD WAS ONLY 380 KVA AND THE ASSESSEE MADE APPLICATION TO CORRECT TH E LOAD OF 625 KV A AS PER EXPERT'S OPINION. VII. THAT THE ASSESSEE SUBMITTED THAT DUE TO POOR QUALIT Y OF PRODUCTION THE ASSESSEE WAS FORCED TO CHANGE THE MANUFACTURING PROCESS AND THE A.O. HAS NOT GIVEN AN Y CONTRADICTORY REMARKS ON EXPERT'S REPORT. VIII. THE ASSESSEE HAS PRODUCED LOG BOOK OF CONSUMP TION OF DIESEL AND THE A.O. HAS NOT MADE ANY COMMENT ON THA T. THE LOG BOOK WAS CHECKED/INSPECTED BY VARIOUS DISTRICT AUTH ORITIES WHO HAVE PUT THEIR SIGNATURES AND SEALS THEREON. ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 12 6.7.2. DISPUTED POINTS: 1. THAT THE A.O. HAS COMPUTED TOTAL INCOME OF THE ASSESSEE AT RS.3,72,94,502/- AND MADE ADDITION OF RS.3,59,35,876/- AND AS PER THE A.O. THIS ADDITION REPRESENTS EXCESSIVE CONSUMPTION OF DIESEL. ON THE OTHER HAND, THE ASSESSEE HAS STATED THAT THE ASSESSEE HAS GIVEN PROPER REASONS FOR THE CONSUMPTION OF DIESEL AND PRESUMPTION OF CONSUMPTION OF EXCESS DIESEL IS BASE D UPON IMAGINARY REASONS AND THE A.O. TOTALLY IGNORED THE ACTUAL FACTS THAT IN THE YEAR UNDER CONSIDERATION THE ENTI RE PRODUCTION WAS MADE BY MAKING PART USES OF ELECTRIC ITY AND DIESEL. 2. THAT THE A.O. HAS COMPARED THE CONSUMPTION OF DIESEL AND PRODUCTION OF LAST THREE YEARS ON AVERAG E BASIS TO ARRIVE AT THE FIGURE OF EXTRA CONSUMPTION OF DIE SEL. HOWEVER, THE ASSESSEE HAS MADE OBJECTION ON ARITHME TICAL CALCULATION IN THE LIGHT OF THE LOG BOOK AND BOOKS OF ACCOUNT, IN WHICH THE A.O. HAS NOT FOUND ANY DEFECT S. 3. THAT AS PER THE ASSESSEE, THE CONSUMPTION OF D IESEL WAS 5-TIMES THE CONSUMPTION OF ELECTRICITY WHICH INCREA SED 15- TIMES IN THE PROCESS WHICH REQUIRED 24 HOURS OF STE AM PRODUCTION FOR 2 BOILERS AND THE ASSESSEE ALSO UTIL IZED THE DIESEL FOR TRACTORS AND TROLLEY TO SHIFT THE GOODS FROM ONE PLACE TO ANOTHER. THE AO, HOWEVER, DID NOT CONSIDER THE EXTRA CONSUMPTION OF DIESEL FOR OTHER PURPOSES. 4. THAT AS PER ASSESSEE THE G.P. RATE SHOT FROM 2.2 8% TO 3.03% DUE TO THE NEW PRODUCTION PROCEDURE AND TH E ADVICE OF EXPERT. ON THE OTHER HAND, THE ORDER OF T HE A.O. DOES NOT SAY ANYTHING ON THIS POINT AND IN THE REMA ND REPORT ALSO THE A.O. HAS NOT MADE ANY COMMENT ON TH IS. 5. THAT AS PER AO, EXPERT'S REPORT AND SALE-TAX OR DER HAVE NO EVIDENTIARY VALUE. ON THE OTHER HAND, THE A SSESSEE STRONGLY RELIES UPON THE EXPERT'S REPORT AND IN SUP PORT OF HIS CLAIM THE ASSESSEE HAS FILED THE PAPER BY WHICH , THE ASSESSEE HAS APPLIED FOR INCREASE IN LOAD WHICH WAS ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 13 SANCTIONED AFTER TWO YEARS. ACCORDING TO AR, THE A. O. CANNOT IGNORE THE EXPERT'S REPORT AND THE SALES-TAX ORDER WHICH ONLY SUBSTANTIATE WITH FINALITY THE STATE OF AFFAIRS REFLECTED BY THE BOOKS OF ACCOUNTS. 6. THAT THE ASSESSEE HAS CITED A NUMBER OF CASES IN SUPPORT OF HIS CLAIM. HOWEVER, THE A.O. HAS NOT MAD E ANY COMMENTS ON THE CASE-LAWS REFERRED TO BY THE ASSESS EE. FROM THE DISPUTED FACTS, IT IS CLEAR THAT THE CENTR AL DISPUTE RELATES TO THE EXCESS CONSUMPTION OF DIESEL . THE MAIN EMPHASIS OF THE ASSESSEE WAS BASED UPON EXPERT 'S OPINION TO CHANGE THE PROCESS WHICH WAS BASED ENTIR ELY ON ELECTRICITY TO THE PROCESS BASED ON ELECTRICITY AND DIESEL GENERATORS SETS. THE ASSESSEE HAS MAINTAINED COMPLE TE BOOKS OF ACCOUNT, BILLS, VOUCHER, STOCK REGISTER AN D LOG BOOK OF CONSUMPTION OF DIESEL. THE ASSESSEE IS ALSO ASSESSED TO TAX WITH TRADE-TAX AUTHORITIES AND FURN ISHED ALL THE NECESSARY INFORMATION AS ASKED FOR BY THE A O FROM TIME-TO-TIME. A REMAND REPORT FROM THE A.O. WAS OBT AINED ON THE SUBMISSION MADE BY THE ASSESSEE. THE ASSESSM ENT RECORDS SHOW THAT THE ASSESSEE ALREADY HAD FURNISHE D NECESSARY INFORMATION AS FILED IN THE APPEAL PROCEE DINGS EXCEPT EXPERT'S OPINION AND THE SALES-TAX OFFICER'S ORDER. THE BOOKS OF ACCOUNT WERE PRODUCED AT THE TIME OF HEARING. THE A.O. HAS MADE THE ASSESSMENT AND DISALLOWANCE OF DIESEL BASED UPON PREVIOUS HISTORY OF THE CONSUMPTION OF THE DIESEL. THE SUBMISSION OF THE AS SESSEE IS POINT-WISE CONSIDERED AS UNDER: I. BEFORE THE AO AS WELL AS THE CIT(A) THE ASSESSEE STATES THAT IN THE EARLIER YEAR, THE ASSESSEE WAS MANUFACTURING AATA, SUJI & MAIDA WITH THE AUTOMATIC PLANT AND THE PLANT WAS MAINLY RUN THROUGH ELECTRIC ITY, HUT IN THE YEAR 2005-06 THERE WAS VOLTAGE FLUCTUATION A ND DUE TO LOW VOLTAGE, THE PLANT WAS NOT WORKING PROPERLY. AS PER OLD PROCEDURE, THE GRAIN WAS USED IN WET CONDITION BY DIPPING IN WATER TANK AND WITH THE ELECTRICITY FAIL URE WET GRAIN AND THEIR PRODUCES GAVE SMELL AND THE QUALITY OF THE AATA, SUJI & MAIDA BECAME VERY INFERIOR AND COULD N OT ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 14 REMAIN FIT FOR HUMAN CONSUMPTION. DISTRICT SUPPLY O FFICER WANTED THE ASSESSEE NOT TO SELL SUCH PRODUCT IN THE OPEN MARKET. THE ASSESSEE, THEREFORE, REQUIRED TO OBTAIN A REPOR T FROM AN EXPERT, - A TECHNICAL PERSON TO IMPROVE THE QUAL ITY OF THE PRODUCT TO RUN THE INDUSTRY PROPERLY. II. AFTER INSPECTING, THE EXPERT HAS GIVEN FOLLOWING SUGGESTIONS: (I) INCREASE LOAD TO 625 KV A. (II) IN FLUCTUATION AND LOW VOLTAGE IMMEDIATELY STOP THE ELECTRICITY AND RUN THE INDUSTRY ON GENERA TOR SET ON A 625 KVA. (III) USE TWO BOILERS TO OBTAIN 24 HOURS STEAM AND STEAM SHOULD BE PASSED THROUGH WET GRAINS, WHIC H WILL REMOVE THE SMELL AND QUALITY OF THE PRODUCT AND MAK E IT OF 'A' GRADE. THE ASSESSEE FOLLOWED THE SUGGESTION AND INSTALLED TWO BOILERS AND MADE REQUEST TO THE ELECTRICITY DEP ARTMENT TO INCREASE THE LOAD TO 700 KV A WHICH WAS NOT POSS IBLE UPTO THE F. Y. 2006-07. HENCE, TOTAL PRODUCTION WAS MADE BY THE ASSESSEE BY USING GENERATOR SET. THE SUBMISSIONS OF THE ASSESSEE HAVE SUBSTANCE BECAUSE BY FOLLOWING THE EXPERT'S OPINION, THE G.P. RATE SHOT UP FROM 2.28% TO 3.03%. THE ASSESSEE ALSO SUBMITTED IN HIS WRITTEN SUBMISSION THAT THE SALES-TAX AUTHORITIES, AFTER EX AMINING THE BOOKS OF ACCOUNT WERE FULLY SATISFIED WITH THE TRADING RESULTS INCLUDING SALES, PURCHASES, MANUFACTURING A CCOUNT, OPENING & CLOSING STOCK. THEREFORE, RESULTS AS PER BOOKS OF ACCOUNT ARE TRUE AND CORRECT. HENCE, A.O. CANNOT DI STURB THE RESULTS OF TRADING AND PROFIT & LOSS A/C. THE A .O. EVEN IN HIS ASSESSMENT ORDER AS WELL AS REMAND REPO RT, CLEARLY STATED THAT THE DIESEL WAS ACTUALLY CONSUME D BUT IN COMPARISON TO EARLIER YEAR IT WAS ON HIGHER SIDE. H ENCE, HE DISALLOWED PART OF CONSUMED DIESEL. ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 15 THE ASSESSEE HAS PRODUCED PHOTOCOPY OF THE BILLS OF M/S BHARAT PETROLEUM CORP. LTD., CARRYING INVOICE NO.1100 DATED 20.07.2006. THE BILLS CLEARLY SHOW THAT PURCHASE OF DIESEL UNDERGOES SUPERVISION OF VARIOUS PETROLEUM AUTHORIT IES AND THE SUPPLY IS MADE TO THE ASSESSEE'S TANKER UND ER THE EARTH. THEREFORE, THERE IS ZERO POSSIBILITY TO SELL THE DIESEL IN THE OPEN MARKET. THE A.O. IN HIS ORDER AND THE R EMAND REPORT HAS NOT INDICATED ANY SALE OF DIESEL IN THE OPEN MARKET. THEREFORE, THERE IS NO DOUBT THAT DIESEL PU RCHASED BY THE ASSESSEE WAS CONSUMED FOR THE PRODUCTION OF AATA, SUJI & MAIDA. THE ASSESSEE HAS SHOWN LOG BOOK RELATED TO CONSUMPTION OF DIESEL. THIS LOG BOOK MAINTAINED BY THE ASSESSEE SHOWS DAILY STOCK OF DIESEL AND DETAILS OF CONSUMPTION OF OIL FOR DIFFERENT PURPOSES. THE LOG BOOK IS REGULARLY MONITORED BY DISTRICT AUTHORITIES, SALES- TAX AUTHORITIES AND THIS RECORD WAS ALSO COUNTERSIGNED BY THE AUTHORITIES GIVING THEIR SIGNATURES AND SEALS. A CO PY OF THE LOG BOOK WAS PRODUCED. THE A.O. HAS NOT MADE ANY COMMENTS ON IT. THE CONSUMPTION OF DIESEL, THEREFOR E, WAS JUSTIFIED VIS-A-VIS THE LOG BOOK. WHEN IT IS MONITO RED BY DISTRICT AUTHORITIES & SALES-TAX AUTHORITIES, THE CONSUMPTION OF DIESEL FOR THE BUSINESS PURPOSE CANN OT BE DOUBTED. THE ASSESSEE IN HIS WRITTEN SUBMISSIONS RELIED UPON VARIOUS CASE LAWS AND THE SUBMISSION WAS SENT TO TH E A.O. FOR HIS COMMENTS. THE A.O. HAS NOT MADE ANY COMMENT ON THE CASE-LAWS. THE CASE-LAWS REFERRED TO BY THE ASS ESSEE ARE: - (I) S.A. BUILDER LTD. VS. CIT 288-ITR-L (SC) (II) CIT VS. PURE PHARMA PVT. LTD., 277-ITR-273 (I) CIT VS. DALMIYA PVT. LTD., 254-ITR-377 (DEL.) (II) CIT VS. GALAXY POWER CABLE LTD., 294-ITR-493 (DEL.) (III) ABBAS WAZIR VS. CIT, 265-I TR-77 (ALL.) (IV) CIT VS. DEVAYHI BEVERAGES LTD., 296-ITR-41 (DEL.) ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 16 THE CASE-LAWS INCLUDING THOSE OF THE SUPREME COURT AND ALLAHABAD HIGH COURT CASE SUPRA DIRECT THAT WHE NEVER A CLAIM IS MADE BY THE ASSESSEE BEFORE THE INCOME-T AX OFFICER FOR ALLOWING AN EXPENDITURE AS A LEGITIMATE BUSINESS EXPENDITURE, THE APPROACH OF THE INCOME-TA X OFFICER (OR OTHER INCOME-TAX AUTHORITY) HAS TO BE T HAT HE HAS TO LOOK AT THE MATTER FROM THE VIEW POINT OF A PRUDENT BUSINESSMAN, AND NOT FROM HIS OWN VIEW POINT, AND T HEN ASCERTAIN WHETHER THE SAID EXPENDITURE HAS BEEN INC URRED FOR THE PURPOSE OF COMMERCIAL EXPEDIENCY. THE CASE-LAWS CLEARLY FAVOUR THE ASSESSEE BECAUSE THE ASSESSEE HAS INCURRED THE EXPENDITURE AS A PRUD ENT BUSINESSMAN TO EARN MORE PROFIT. THE ASSESSEE ALSO RELIED UPON THE CASE OF MADAN LAL & BROTHERS VS.ACIT, 1-S0T-404 (DEL.) IN WHICH, HON' BLE I.T.AT. CONCLUDED AS UNDER: 'WE HAVE GIVEN CAREFUL CONSIDERATION TO THE MATERIAL ON THE FILE AND THE SUBMISSIONS OF THE RIV AL PARTIES. WE ARE THE VIEW THAT THE IMPUGNED ENHANCEM ENT BY THE LD. CIT(A) HAS NO LEG TO STAND. THE ENHANCEM ENT WAS MADE PURELY ON HYPOTHESIS AND CONJECTURE IN COM PLETE DISREGARD OF THE FACTS RECORDED IN THE BOOKS OF ACC OUNT. NO MATERIAL HAD BEEN BROUGHT ON RECORD BY THE LD. CIT( A) TO PROVE THAT THE CONSUMPTION OF DIESEL AND LDO AS REC ORDED IN THE BOOKS OF ACCOUNT WERE WRONG AND FALSE. IT WA S WRONG ON THE PART OF THE LD. CIT(A) TO WORK OUT EXC ESSIVE CONSUMPTION OF DIESEL AND LDO ON THE BASIS OF THE R UNNING OF THE GENERATOR FOR NUMBER OF HOURS PER DAY AND NU MBER OF THE DAYS PER MONTH ON HIS OWN HYPOTHESIS DISREGA RDING THE ACTUAL RUNNING AND RECORDING IN THE BOOKS OF AC COUNT. THE ENHANCEMENT WAS TOTALLY UNWARRANTED AND UNCALLE D FOR. IN THE ABOVE VIEW OF THE MATTER WE DELETE THE ADDITION OF RS.3,73,403.' ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 17 THIS CASE-LAW ALSO FULLY SUPPORTS THE SUBMISSIONS O F THE ASSESSEE. SIMILARLY, THE ASSESSEE ALSO RELIED O N FOLLOWING I.T.A.T. JUDGMENTS: (I) CIT VS. GIRNAR CONSTRUCTION CO. [2003] 129-TAXMAN-691 (RAJ.) (II) RAKESH KUMAR JAYANTI LAL GUPTA VS. ASSISTANT COMMISSIONER OF INCOME-TAX, 55-ITD-97 THE AR ALSO RELIED ON I.T.A.T. ORDER IN ITA NO. 835/DEL/09 FOR THE A.Y. 2001-02 HON'BLE I.T.AT. 'D' BENCH DELHI IN THE CASE OF ANKIT GLASS PVT. LTD. VS. AC.I .T., CIRCLE-I, MEERUT, VIDE HIS ORDER DATED 15-01-2010 I N WHICH IT WAS HELD AS UNDER: 'WE ARE THE VIEW THAT NO ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT DESERVES TO BE MADE IN THE HAND OF THE ASSESSEE BECAUSE SALES HAVE BEEN ACCEPTED BY THE SA LES-TAX DEPARTMENT AS WELL AS CENTRAL EXCISE. THE ASSESSEE HAS PRODUCED THE ALLEGED MIDDLEMAN THROUGH WHOM THESE AMOUNTS HAVE BEEN COLLECTED AND GOODS WERE SUPPLIED . IT IS NOT A SIMPLE CASE OF TAKING LOAN OR UNEXPLAINED MON EY ROUTED BY THE ASSESSEE THROUGH DIFFERENT NAMES. THE LD. CIT(A) THOUGH POINTED OUT CERTAIN CIRCUMSTANCES GIV ING RISE TO SUSPICION BUT THOSE ARE NOT STRONG ENOUGH T O CHARGE THE ASSESSEE WITH TAX ON THESE AMOUNTS. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE LD. COMMISSIONER IS NOT SUSTAINABLE AND WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 25, 14,600/-.' THE ABOVE CASE ALSO SUPPORTS THE ASSESSEE'S CLAIM THAT IF BOOKS OF ACCOUNT ARE SUPPORTED BY SALES-TAX AUTHORITIES THEN RESULTS OF BOOKS OF ACCOUNT CANNOT BE DISBELIEVED. THE AR ALSO RELIED ON THE HON'BLE ALLAHABAD HIGH COURT JUDGMENT IN THE CASE OF CIT VS. RAJ KUMAR SIN GH & CO., 295-ITR-81, WHICH HELD AS UNDER: ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 18 'THAT THE TRIBUNAL FOUND THAT THE PAYMENT MADE BY THE HIRER OF THE MACHINERY, STOOD CONFIRMED FROM TH E ACCOUNT BOOKS MAINTAINED BY THE HIRER AS ALSO THAT OF THE ASSESSEE AND NO DISCREPANCY REGARDING ANY MAJOR PAY MENT OR PAYMENT NOT BEING RECORDED IN THE BOOKS OF ACCOU NT, HAD BEEN POINTED OUT. HENCE, THE PROVISIONS OF SECT ION 145(2) OF THE ACT WERE NOT ATTRACTED AND THE INCOME HAD TO BE ASSESSED ON THE BASIS OF ACTUAL RECEIPTS AS DISC LOSED BY THE ASSESSEE.' THE OBSERVATIONS OF THE A.O. ARE BASELESS BECAUSE THE A.O. IGNORED FOLLOWING FACTS: 1. IN EARLIER YEAR TOTAL LOAD OF ELECTRICITY WAS 21 0 K.V.A. HOWEVER, THE ASSESSEE REQUESTED TO ELECTRICI TY DEPARTMENT TO INCREASE THE LOAD TO 500 K.V.A. ELECT RICITY DEPARTMENT INCREASED THIS LOAD AFTER ONE AND A HALF YEAR. 450 K.V.A. DATED 18-08-2007 495 K.V.A. DATED 19-05-2008 625 K.V.A. DATED 26-0.5-2009 PHOTOCOPY OF SANCTION LETTER BY ELECTRICITY DEPARTMENT WAS PRODUCED. THEREFORE, THE ASSESSEE DEPENDED UPON GENERATOR ONLY AS STATED. 2. THE ASSESSEE FURNISHED THE EXPERT'S REPORT, WHIC H DESCRIBED THE SPECIFICATION OF GENERATOR ALONG WITH CONSUMPTION THE FUEL. ACCORDING TO WHICH, CONSUMPTI ON OF DIESEL FOR VARIOUS GENERATORS USED BY THE ASSESSEE, WERE AS UNDER : (I) GENERATOR OF 380 K.V.A. 95 LTRS/HO UR (II) GENERATOR OF 160 K.V.A. 40 LTRS/HOU R (III) GENERATOR OF 140-150 K.V.A. 38 L TRS./HOUR THEREFORE, THE AVERAGE CONSUMPTION OF THE DIESEL PE R DAY COMES TO 173 LTRS/HOUR X 20 = 3460 LTRS/DAY. 3. THE A.O. HAS ESTIMATED THE WORKING DAY ONLY 300 DAYS IN A YEAR AND WORKING HOURS OF ONLY 8 HOUR /DAY. HOWEVER, ASSESSEE'S WORKING DAYS WERE 357-DAYS AND ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 19 WORKING HOURS 18-23 HOURS/DAY. THEREFORE, CALCULATI ON OF THE A.O. IS ERRONEOUS. 4. THE A.O. IGNORED THE FACTS THAT THE SALE & PURCHASE AND STOCK OF THE BUSINESS WAS ALSO EXAMINE D BY TRADE-TAX AUTHORITY AND STOCK OF DIESEL WAS EXAMINE D BY THE DISTRICT AUTHORITY WHO PUT SIGNATURES AND STAMP ON THE STOCK REGISTER. THEREFORE, CONSUMPTION OF THE DIESE L CANNOT BE SAID TO BE BEYOND THE LOG BOOK. COPIES OF LOG BO OK AND TRADE-TAX ORDER OF THE YEAR WERE PRODUCED. 5. THE CASE-LAWS CITED BY THE ASSESSEE WERE N OT CONSIDERED BY THE A.O., WHICH ARE FULLY APPLICABLE TO THE FACTS OF THE CASE. CONSIDERING THE FACTS OF THE CASE, WRITTEN SUBMISSIONS OF THE AR, DOCUMENTS FILED BY THE ASSES SEE DURING THE ASSESSMENT PROCEEDING, APPELLATE PROCEED INGS AND THE CASE-LAWS, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE CONSUMPTION OF DIESEL. HOWEVER, IT IS SEEN THAT THE ASSESSEE IS ALSO HAVING A DIESEL CAR AND THE POSSIBILITY OF PERSONAL USE OF THE SAME CANNOT BE R ULED OUT. HENCE, ADDITION OF RS.3,59,35,876/- IS REDUCED BY RS.1,20,000/- (10,000 X 12) TREATING THE USE OF DIE SEL FOR PERSONAL USE TO THAT EXTENT. (RELIEF 3,59,35,876 - 1,20,000 = 3,58,15,876/-). 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 8. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUN AL IN THIS SECOND APPEAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. 9. AS PER FINDINGS OF THE COMMISSIONER OF INCOME TA X(A), WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX(A) GRANTED RELI EF TO THE ASSESSEE AND RESTRICTED THE DISALLOWANCE AND ADDITION ONLY UPTO RS.1,20,000 BY HOLDING THAT SINCE THE ASSESSEE USED A DIESEL CAR, THE POSS IBILITY OF PERSONAL USE OF THE ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 20 SAME CANNOT BE RULED OUT. BEING AGGRIEVED BY THE A BOVE IMPUGNED ORDER, THE REVENUE HAS FILED THIS APPEAL. GROUND NO. 1 TO 4 OF THE REVENUE 10. APROPOS GROUND OF THE REVENUE, LD. DR SUBMITTE D THAT IF ASSESSEE CAN BE HELD FOR PERSONAL CONSUMPTION OF DIESEL IN ITS C AR AND THIS VERY FACT IS NOT DISPUTED BY THE ASSESSEE, THEN WHY THERE CANNOT BE A POSSIBILITY OF USE OF DIESEL FOR OTHER PURPOSE AND SALE IN THE OPEN MARKE T. THE DR FURTHER CONTENDED THAT DURING THE APPELLATE PROCEEDINGS, IT WAS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CONSUMPTION OF DIESEL BUT THE COMMISSIONER OF INCOME TAX(A) IGNORED SOME VERY IMPORTANT FACTS RELATED TO THE ISSUE. THE DR VEHEMENTLY CONTENDED THAT AS PER DETAIL OF ACCOUNTS SUBMITTED BY THE ASSESSEE, THE LABOUR AND WAGE WERE NOT INCREASED IN COMPARISON TO SUBSTANTIAL INCREASE IN WORKING HO URS AND SHIFTS. THE DR ALSO POINTED OUT THAT THE COMMISSIONER OF INCOME TA X(A) WAS NOT CORRECT IN RELYING ON SALES TAX/TRADE TAX ORDER BECAUSE THE AS SESSING OFFICER POINTED OUT CERTAIN MISTAKES IN THE QUANTITY OF CONSUMPTION OF DIESEL AND ALSO THE REASONABLENESS OF THE CLAIM OF THE ASSESSEE. THE D R FORCEFULLY CONTENDED THAT THE CASE LAWS RELIED BY THE COMMISSIONER OF IN COME TAX(A) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND COM MISSIONER OF INCOME TAX(A) DID NOT CONSIDER THE COMPARATIVE ANALYSIS OF DIESEL CONSUMED AND ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 21 OUTPUT OF PRODUCTION MADE DURING THE YEAR AND COMMI SSIONER OF INCOME TAX(A) DID NOT APPLY ANY TEST CHECK FOR BUYING OF I NFERIOR QUALITY OF INPUTS AND SUPERIOR QUALITY OF OUTPUT MADE WITH REGARD TO PURCHASE AND SALE BILL. 11. THE DR FINALLY SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE EXCESS CONSUMPTION OF DIESEL WAS WHOLLY AN D EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND AT LEAST MAJOR PART OF DIES EL CONSUMPTION HAS BEEN HELD TO BE NOT FOR THE BUSINESS PURPOSE AND USE. T HE DR SUBMITTED THAT THERE WAS NO CORRESPONDING INCREASE IN THE PURCHASE OR CO NSUMPTION OF RAW MATERIAL, WAGES AND LABOUR CHARGES TO SUPPORT ASSES SEES CLAIM THAT THE MILL WAS RUN ON EXTRA SHIFT AND THE EVIDENCE PERTAINING TO PURCHASE OF GENERATOR WAS ALSO NOT RELIABLE. THEREFORE, IMPUGNED ORDER D ESERVES TO BE SET ASIDE AND DISALLOWANCE MADE BY THE ASSESSING OFFICER MAY BE CONFIRMED. 12. REPLYING TO THE ABOVE, THE ASSESSEES LD. COUNS EL SUBMITTED THAT THE ASSESSEE EXPLAINED EXCESSIVE CONSUMPTION OF DIESEL WITH COGENT AND RELIABLE EXPLANATION. THE COUNSEL OF THE ASSESSEE FURTHER S UBMITTED THAT THE ASSESSEE WAS FACING PROBLEMS IN ELECTRICITY SUPPLY AND ASSES SEE ALSO WANTED TO IMPROVE THE QUALITY OF ITS PRODUCTION, THEREFORE, T HE ASSESSEE WAS COMPELLED TO INSTALL TWO GENERATORS AND TWO BOILERS DURING TH E YEAR UNDER CONSIDERATION. THE COUNSEL HAS ALSO DRAWN OUR ATTENTION THAT THE A SSESSEE USED EXCESSIVE QUANTITY OF DIESEL TO IMPROVE THE QUALITY OF ITS PR ODUCTS AND FOR ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 22 MANUFACTURING OF SUPER FINE CHOKER FROM ORDINARY CH OKER AND FOR THIS PURPOSE, THE ASSESSEE HAS TO INSTALL SIX BODY CHAKK I ROUND THE YEAR IN ADDITION TO ABOVE MENTIONED GENERATORS AND BOILERS. THE COUNSEL ALSO POINTED OUT THAT THERE WAS A SHARP DECREASE IN THE SUPPLY OF ELECTRICITY AND ON THE OTHER HAND, THE ASSESSEE INSTALLED ADDITIONAL G ENERATOR BOILERS AND OTHER EQUIPMENTS WITH THE INTENTION TO IMPROVE THE QUALIT Y AND TO FILL THE DEFICIT OF ELECTRICITY SUPPLIED DURING THE YEAR, THEREFORE, TH E EXCESSIVE CONSUMPTION OF DIESEL WAS FULLY JUSTIFIED BY THE ASSESSEE AND THE COMMISSIONER OF INCOME TAX(A) RIGHTLY ACCEPTED THE EXPLANATION OF THE ASSE SSEE. IN ADDITION TO ABOVE ARGUMENTS, LD. COUNSEL OF THE ASSESSEE HAS AL SO DRAWN OUR ATTENTION TOWARDS GP RATE OF THE ASSESSEE AND SUBMITTED THAT THE GP RATE OF THE YEAR UNDER CONSIDERATION SHOT UP FROM 2.28% TO 3.03% IN COMPARISON TO IMMEDIATE PRECEDING ASSESSMENT YEAR, THEREFORE, THE EXCESSIVE CONSUMPTION OF DIESEL GAVE HIGH QUALITY OF PRODUCTION WHICH RES ULTED INTO HIGH GP RATE DURING THE YEAR, WHICH ALSO SUPPORT THE EXPLANATION OF THE ASSESSEE. THE COUNSEL VEHEMENTLY CONTENDED THAT UNLESS AND UNTIL THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY FACT THAT THE ASSESSEE MISU SED ANY PART OF DIESEL PURCHASED AND ON THE OTHER HAND, WHEN ASSESSEE WAS ABLE TO SUBSTANTIATE ITS CLAIM OF CONSUMPTION OF DIESEL WITH RELIABLE EVIDEN CE, THEN NO DISALLOWANCE AND ADDITION CAN BE MADE IN THIS REGARD. ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 23 13. WE HAVE HEARD AND CAREFULLY CONSIDERED ABOVE RI VAL ARGUMENTS OF BOTH THE PARTIES. WE HAVE ALSO CAREFULLY PERUSED T HE CITATIONS AND LEGAL PROPOSITIONS DISCUSSED AND RELIED BY THE AUTHORITIE S BELOW, ENTIRE RECORD PLACED BEFORE US AND PAPER BOOKS SUBMITTED BY THE A SSESSEE. 14. AT THE OUTSET, WE OBSERVE THAT AS PER OBSERVATI ONS AND FINDINGS OF THE AUTHORITIES BELOW, THE FOLLOWING UNDISPUTED FACTS E MERGE:- I) THAT THE GP RATE OF THE YEAR UNDER CONSIDERATION SH OT UP FROM 2.28% TO 3.03% IN COMPARISON TO IMMEDIATE PRECEDING YEAR TO THE ASSESSMENT YEAR IN QUESTION; II) THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOU NTS INCLUDING STOCK REGISTER, BILLS, VOUCHERS, LOG BOOK AND WAGES PAYMENT REGISTER WHICH WERE ALSO PRODUCED BEFORE TH E ASSESSING OFFICER; III) THE ASSESSEE MADE PURCHASE OF DIESEL FROM INDIAN OI L CORPORATION AND BHARAT PETROLEUM CORPORATION AMOUNT ING TO RS.5,68,58,808; IV) THE TOTAL SALE OF MANUFACTURING GOODS DURING THE YE AR WAS AMOUNTING TO RS.36.70 LAKH AND THE ASSESSING OFFICE R HAS NOT MADE ANY DISPUTE ABOUT THE SALE, PURCHASE, OPENING STOCK AND ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 24 CLOSING STOCK SHOWN BY THE ASSESSEE AND ASSESSEE AL SO PRODUCED HIGH OR SUPERFINE QUALITY OF CHOKER DURING THE YEAR ; V) THE ASSESSEE MADE APPLICATION TO ENHANCE THE ELECTR ICITY LOAD FROM 380 KVA TO 625 KVA AS PER EXPERTS OPINION AND THE ASSESSING OFFICER HAS NOT GIVEN ANY NEGATIVE REMARK S ON THE EXPERTS REPORT AND ASSESSEE COULD NOT GET HIGHER 6 25 KVA CONNECTION DURING THE YEAR; AND VI) THE ASSESSING OFFICER HAS NOT MADE ANY REMARK OR CO MMENT ON THE LOG BOOK OF CONSUMPTION OF DIESEL SUBMITTED BY THE ASSESSEE AND WHICH WAS ALSO CHECKED BY DISTRICT AUT HORITY. 15. AS PER SUBMISSIONS AND CONTENTIONS OF THE DR, T HE COMMISSIONER OF INCOME TAX(A) GRANTED RELIEF TO THE ASSESSEE BY IGN ORING AND NOT CONSIDERING SOME MATERIAL FACTS. ON THE OTHER HAND , THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS IGNO RED THIS VERY FACT THAT THERE WAS A SUBSTANTIAL INCREASE IN THE GP RATE OF THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION IN COMPARISON TO THE IMMEDIATE PRECEDING YEAR. LD. COUNSEL OF THE ASSESSEE SUBMITTED COMPARATIVE CHART OF FIVE YEARS FROM AY 2004-05 TO 2008-09 SHOWING QUANTITY OF PROCESSED WH EAT, QUANTITY OF PROCESSED CHOKER, AMOUNT OF TOTAL SALE PROCEED AND GROSS PROFIT TO SHOW THAT THE GP WAS HIGHER IN COMPARISON TO EARLIER AND SUBS EQUENT YEARS DURING THE ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 25 IMPUGNED YEAR OF ASSESSMENT. THE COUNSEL OF THE AS SESSEE HAS ALSO SUBMITTED A CHART SHOWING UNIT OF ELECTRICITY CONSU MED, AMOUNT PAID AND OTHER FACTS AND REMARKS FOR AY 2005-06 TO AY 2009-1 0. THE ASSESSEE HAS ALSO FURNISHED ANOTHER CHART SHOWING QUANTITY OF DI ESEL CONSUMED FROM AY 2005-06 TO AY 2009-10 WHICH ALSO SHOW AMOUNT PAID F OR PURCHASE OF DIESEL AND THE FACTS PERTAINING TO THE QUALITY OF MANUFACT URED GOODS AND POSITION OF AVAILABLE ELECTRICITY LOAD DURING THESE YEARS TO JU STIFY THE INCREASE OF DIESEL CONSUMPTION DURING THE YEAR. THE ASSESSEE HAS ALSO SUBMITTED COPIES OF THE ACCOUNTING RESULTS FOR AY 2005-06 TO 2009-10, COPY OF DIESEL ACCOUNT, COPY OF ELECTRICITY ACCOUNT AND COPIES OF ORIGINAL DIESE L BILLS. 16. ON THE COMPARATIVE CHARTS, ACCOUNTING DETAILS A ND OTHER EVIDENCE AND DOCUMENTS SUBMITTED BY THE ASSESSEE, THE DR POINTED OUT THAT THESE COMPARATIVE CHARTS, ACCOUNTS AND DOCUMENTS HAVE NOT BEEN SUBMITTED BEFORE THE ASSESSING OFFICER TO VERIFY THE CORRECTNESS OF THE FACTS SUBMITTED BY THE ASSESSEE AND CORRECTNESS OF THE CLAIM OF THE ASSESS EE PERTAINING TO THE EXCESSIVE DIESEL CONSUMPTION DURING THE YEAR. THE DR CONTENDED THAT THE COMPARATIVE CHART, STATEMENT OF ACCOUNTS AND OTHER DOCUMENTS CANNOT BE CONSIDERED TO SUPPORT THE FINDINGS OF THE COMMISSIO NER OF INCOME TAX(A) IN THE IMPUGNED ORDER WITHOUT EXAMINATION AND VERIFICA TION AT THE END OF ASSESSING OFFICER. THE DR ALSO SUBMITTED WRITTEN S UBMISSIONS AND ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 26 CONTENDED THAT THE EVIDENCE, DOCUMENTS AND COMPARAT IVE CHARTS WERE NOT SUBMITTED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS, THEREFORE, IF FOUND NECESSARY, THE ASS ESSING OFFICER SHOULD BE GRANTED AN OPPORTUNITY TO EXAMINE AND VERIFY THESE DOCUMENTS AND EVIDENCE SUBMITTED BY THE ASSESSEE TO SUPPORT ITS CLAIM OF E XCESSIVE DIESEL CONSUMPTION. 17. FROM A CAREFUL PERUSAL OF THE ASSESSMENT ORDER, WE OBSERVE THAT AS PER ASSESSING OFFICER, THE CONSUMPTION OF DIESEL WAS EX CESSIVELY HIGH IN COMPARISON TO THE EARLIER YEARS. ON PAGE 3 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS FURNISHED A CHART SHOWING CON SUMPTION OF DIESEL WHICH GIVES FIGURES IN RESPECT OF CONSUMPTION OF DI ESEL (IN LITRES) AND RAW MATERIAL CONSUMED (IN QUINTALS). THE ASSESSING OFF ICER HAS HELD THAT THE CONSUMPTION OF DIESEL WAS QUITE HIGH DURING THE YEA R UNDER CONSIDERATION. THE ASSESSING OFFICER HAS CALCULATED THE AVERAGE CO NSUMPTION OF THREE YEARS AS 640.55 LTRS PER QUINTAL OF RAW MATERIAL CONSUMED AND HELD THE SAME TO BE COGENT AND REASONABLE. ON THE BASIS OF THIS ANALOG Y, THE ASSESSING OFFICER CALCULATED THE TOTAL ALLOWABLE CONSUMPTION AT 6,85, 705.25 LTRS AND REMAINING BALANCE OF 12,17,340 LTRS OF CLAIMED CONS UMPTION OF DIESEL HAD BEEN HELD AS EXCESS DIESEL CONSUMED. THE ASSESSING OFFICER, THEREFORE, TOOK THE COST OF DIESEL AT RS.29.52 PER LTR AND, HENCE, RS.3,59,35,876 HAS BEEN ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 27 DISALLOWED OUT OF DIESEL EXPENSES CLAIMED BY THE AS SESSEE AMOUNTING TO RS.5,65,53,895/-. 18. AS PER IMPUGNED ORDER, THE COMMISSIONER OF INCO ME TAX(A) ALLOWED THE CLAIM OF THE ASSESSEE BY DELETING WHOLE ADDITIO N EXCEPT RS.1,20,000 ON THE GROUND OF PERSONAL USE OF DIESEL IN THE CAR OWN ED BY THE ASSESSEE. FROM THE ASSESSMENT ORDER, WE CLEARLY OBSERVE THAT THE A O HAS MADE DISALLOWANCE PRESUMING THAT THE CONSUMPTION OF RAW MATERIAL WAS 1,07,049.45 QUINTALS WHICH WAS OF WHEAT ONLY. THE ASSESSING OFFICER IGN ORED A VERY IMPORTANT FACT THAT THE ASSESSEE WAS NOT DOING ONLY PROCESSIN G OF WHEAT FOR MANUFACTURING OF ATTA, SUJI AND MAIDA UPTO AY 2006- 07 BUT DURING THE YEAR UNDER CONSIDERATION I.E. AY 2007-08, THE ASSESSEE A LSO STARTED THE PROCESSING OF CHOKER FOR PRODUCING SUPERFINE CHOKER/BRAN WHICH HAD BEEN SOLD FOR RS.6,03,38,004/- DURING THE YEAR. THUS, WE CLEARLY OBSERVE THAT THE ASSESSEE HAS PROCESSED 1,86,207.04 QUINTALS OF CHOKER FOR PR ODUCTION OF SUPERFINE CHOKER/BRAN WHICH PROCESS ALSO USES DIESEL. THE AS SESSING OFFICER HAS NOT CONSIDERED THE CONSUMPTION OF DIESEL FOR THE PURPOS E OF MANUFACTURING OF SUPERFINE CHOKER/BRAN BY PROCESSING OF 1.86 LAKH QU INTALS OF CHOKER. BESIDES THIS FACT, WE ALSO OBSERVE THAT AS PER EXPERT ADVIC E FOR PRODUCTION OF BETTER QUALITY OF CHOKER ETC., THE ASSESSEE NEEDED LOAD OF 625 KVA AGAINST EXISTING LOAD OF 385 KVA BUT DESPITE APPLICATION AND EFFORTS BY THE ASSESSEE, LOAD ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 28 WAS NOT INCREASED DURING THE YEAR. UNDISPUTEDLY, T HE ASSESSEE GOT CONNECTION OF 625 KVA ON 26.05.2009 BEYOND THE PERI OD OF FINANCIAL YEAR UNDER CONSIDERATION. 19. FROM THE SUBMISSIONS OF THE ASSESSEE, WE OBSERV E THAT THE ASSESSEE DECIDED TO PRODUCE ATTA, MAIDA, SUJI AND CHOKER OF BETTER QUALITY AND AS PER THE EXPERT ADVICE, THE ASSESSEE HAD TO PURCHASE TWO GENERATORS WHICH WERE TO BE RUN ONLY ON DIESEL. AS PER REMAND REPORT SUBMIT TED BY THE ASSESSING OFFICER, THE ASSESSEE HAD FURNISHED THE PHOTOCOPY O F THE HANDWRITTEN GENERATOR PURCHASE BILLS HAVING NO COMPLETE ADDRESS OF THE SELLER BUT THE ASSESSING OFFICER HAS NOWHERE DISPUTED THE FACT THA T THESE GENERATORS WERE NOT PURCHASED AT ALL OR WERE NOT PUT TO USE DURING THE YEAR. THE MAIN DISPUTE IS ABOUT THE QUANTITY OF CONSUMPTION OF DIESEL IN T HESE GENERATORS WHICH HAD BEEN ESTIMATED ON DIFFERENT BASIS BY THE ASSESSING OFFICER AND BY THE ASSESSEE. SINCE THE ASSESSING OFFICER HAD NOT DISP UTED THE PURCHASE TO THESE GENERATORS AND THE FACT THAT THE SAME WERE PUT TO U SE AND THE ASSESSING OFFICER HAS ALSO ALLOWED DEPRECIATION THEREON, THER EFORE, WE CLEARLY OBSERVE THAT THE OLD GENERATORS WERE PURCHASED DURING THE Y EAR AND THESE WERE PUT TO USE DURING THE YEAR FOR MANUFACTURING OF HIGH QUALI TY PRODUCTS. THE ASSESSING OFFICER HAS ALSO IGNORED THE FACT THAT TH ESE GENERATORS BEING OLD ONES, CONSUME MORE DIESEL IN COMPARISON TO NEW GENE RATORS. ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 29 20. FROM THE ORDERS OF THE AUTHORITIES BELOW, WE AL SO OBSERVE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ALSO PUR CHASED BOILER FOR STEAMING PROCESS, FOR IMPROVING THE QUALITY OF PRODUCT WHICH ALSO CONSUME SUBSTANTIAL QUANTITY OF DIESEL AND WHICH ALSO CONTRIBUTED TO IN CREASE IN CONSUMPTION OF DIESEL. FROM THE FACTS AND FIGURES SUBMITTED BEFOR E US ON RECORD, WE ALSO OBSERVE THAT THE QUANTITY AND OUTCOME OF THE SALES WERE BETTER DURING THE YEAR IN COMPARISON TO IMMEDIATELY PRECEDING YEAR WH ICH RESULTED IN IMPROVEMENT IN THE GP RATE OF THE ASSESSEE IN COMPA RISON TO THE IMMEDIATELY PRECEDING YEARS. BESIDES THE ABOVE FAC TUAL MATRIX, WE ALSO OBSERVE THAT THE PURCHASE OF DIESEL HAS BEEN SHOWN FROM IOC AND BPCL WHICH WAS SUPPORTED BY PROPER PURCHASE INVOICES ISS UED BY IOC AND BPCL AND THE ASSESSING OFFICER HAS NOT DISPUTED THE AMOU NT OF PURCHASE AND INVOICES/BILLS RAISED BY THE SELLER PETROLEUM COMPA NIES. OBVIOUSLY, THE PURCHASE OF BILLS IS ALWAYS REGULATED UNDER SUPERVI SION OF VARIOUS PETROLEUM AUTHORITIES AND DISTRICT SUPPLY OFFICERS AND SUPPLY OF DIESEL WAS MADE TO THE ASSESSEES TANKER KEPT UNDER THE EARTH AND SUPPLY O F THE DIESEL WAS MADE THROUGH TANKERS OF THE SELLER PETROLEUM COMPANIES U P TO UNDERGROUND TANKERS OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE DIESEL HAS BEEN SOLD IN THE OPEN MARKET OR HAS BEEN USED FOR ANY OTHER PURPOSE. FROM THE I MPUGNED ORDER AND ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 30 SUBMISSIONS OF THE ASSESSEE, WE ALSO OBSERVE THAT T HE ASSESSEE MAINTAINS LOG BOOK OF THE DIESEL WHICH SHOWS SUPPLY AND CONSUMPTI ON OF DIESEL AND LOG BOOK IS VERIFIED AND SIGNED BY THE DISTRICT CIVIL S UPPLY AUTHORITIES. THIS LOG BOOK IS A VITAL EVIDENCE FOR VERIFICATION OF THE CL AIM OF THE ASSESSEE PERTAINING TO THE CONSUMPTION OF DIESEL DURING THE YEAR. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPANCY IN THE LOG BOOK MAINTAINED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS COMPLETELY IGNORED THIS LOG BOOK WHICH IS A DIRECT EVIDENCE FOR SUPPLY AND CONSUMPTION OF DIESEL. ALTHOUGH THERE WAS LITTLE DIFFERENCE IN THE FIGURES OF DIESEL PURCHASED AS PER ORDER OF THE TRADE TAX AUTHORITIES AND ASSESSMENT O RDER BUT THIS CANNOT BE THE BASIS FOR DISALLOWANCE OF MAJOR PART OF THE CLAIM O F THE ASSESSEE. 21. IN THE LIGHT OF DISCUSSIONS MADE HEREINABOVE, W E CLEARLY OBSERVE THAT ABOVE FACTUAL MATRIX COLLECTIVELY ESTABLISH THAT TH E ASSESSEE MAINTAINS PROPER RECORDS TO SHOW THE PURCHASE AND CONSUMPTION OF DIE SEL FOR ITS BUSINESS PURPOSE WHICH JUSTIFIES THE INCREASE OF CONSUMPTION OF DIESEL DURING THE YEAR. WE ALSO NOTICE THAT THE ASSESSING OFFICER HA S FORMED OPINION FOR DISALLOWANCE ON INCORRECT AND INCOMPLETE FACTS AND ALSO BY IGNORING AND NOT CONSIDERING OTHER IMPORTANT EVIDENCE SUBMITTED BY T HE ASSESSEE TO SUPPORT ITS CLAIM. ALTHOUGH THE COMMISSIONER OF INCOME TAX (A) HAS GRANTED RELIEF FOR THE ASSESSEE BUT THE FINDINGS ARE NOT BASED ON COGENT AND JUSTIFIED ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 31 REASONS. ON THE OTHER HAND, WE CLEARLY OBSERVE THA T THE ASSESSING OFFICER SHOULD HAVE CONSIDERED SOME SUBSTANTIAL AND COGENT EVIDENCE SUBMITTED BY THE ASSESSEE TO VERIFY ITS CLAIM PERTAINING TO THE DIESEL CONSUMPTION. THE ASSESSING OFFICER IGNORED VERIFICATION OF DIESEL CO NSUMPTION LOG BOOK, PURCHASE OF GENERATORS, BOILERS AND SIX BODY CHAKKI INSTALLED DURING THE YEAR FOR PRODUCTION OF BETTER QUALITY PRODUCTS. THE ASS ESSING OFFICER ALSO IGNORED A VERY IMPORTANT FACT THAT BESIDES PRODUCTI ON OF ATTA, SUJI AND MAIDA, THE ASSESSEE ALSO STARTED PRODUCTION OF HIGH QUALIT Y CHOKER/BRAN DURING THE YEAR FOR WHICH THE ASSESSEE REQUIRED INCREASED LOAD OF ELECTRICITY AND POWER WHICH THE ASSESSEE COULD NOT GET DURING THE YEAR AN D MAXIMUM USE OF POWER WAS BASED ON GENERATORS. THE ASSESSING OFFICER ALS O IGNORED ANOTHER IMPORTANT FACT THAT THERE WAS LOAD SHEDDING DURING THE YEAR AND ON THE OTHER HAND, THE ASSESSEE WAS COMPELLED TO INSTALL GENERAT ORS, BOILERS AND OTHER EQUIPMENTS TO MEET THE DECREASED SUPPLY OF ELECTRIC ITY AND INCREASED USE OF POWER DURING THE YEAR. 22. AS WE HAVE MENTIONED HEREINABOVE, THE ASSESSEE HAS FURNISHED CERTAIN DOCUMENTARY EVIDENCE AND COMPARATIVE CHART PERTAINI NG TO THE CONSUMPTION OF RAW MATERIAL SUCH AS WHEAT AND CHOKER WITH REGAR D TO CONSUMPTION OF ELECTRICITY, POWER AND USE OF GENERATOR WHICH IS A SUBSTANTIAL EVIDENCE TO SUPPORT THE CLAIM OF THE ASSESSEE PERTAINING TO EXC ESSIVE CONSUMPTION OF ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 32 DIESEL. DURING THE ARGUMENTS, BOTH THE PARTIES HAV E NOT DISPUTED THIS LEGAL PROPOSITION THAT ANY EVIDENCE WHICH HAS NOT BEEN VE RIFIED AT THE END OF THE ASSESSING OFFICER, THE SAME SHOULD BE VERIFIED AT T HE END OF THE ASSESSING OFFICER FOR PROPER AND JUST ADJUDICATION OF THE ISS UE. 23. IN VIEW OF ABOVE DISCUSSION, WE ARE OF THE CONS IDERED OPINION THAT THE ASSESSING OFFICER MADE DISALLOWANCE AND ADDITION BY IGNORING SUBSTANTIAL FACTS AND, ON THE OTHER HAND, THE COMMISSIONER OF I NCOME TAX(A) GRANTED RELIEF TO THE ASSESSEE BY TAKING A THEORETICAL APPR OACH WITHOUT GIVING PROPER OBSERVATION AND FINDING TO THE FACTUAL MATRIX AND D ETAILS AND SUBMISSIONS OF THE ASSSESEE. THUS, WE FIND IT PROPER TO RESTORE T HE ISSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION THAT THE ASSESSI NG OFFICER SHALL VERIFY THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE PERTAINING TO THE DIESEL CONSUMPTION AFTER CONSIDERING ALL THE FACTS, DETAILS AND EVIDEN CE WHICH SUPPORT THE CLAIM OF THE ASSESSEE WITH REGARD TO DIESEL CONSUMED DURI NG THE YEAR. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL AFFORD DUE OPPORTU NITY OF HEARING FOR THE ASSESSEE DURING FRESH ADJUDICATION ON THE ISSUE. A CCORDINGLY, GROUND NO. 1 TO 4 OF THE REVENUE ARE DISPOSED OF WITH THE DIRECT ION TO THE ASSESSING OFFICER AS INDICATED ABOVE AND DEEMED TO BE ALLOWED . ITA NO. 3384/DEL/2010 ASSTT.YEAR: 2007-08 33 GROUND NO. 5 OF THE REVENUE 24. SINCE WE HAVE RESTORED ENTIRE ISSUE TO THE FILE OF ASSESSING OFFICER BY SETTING ASIDE BOTH THE ORDERS OF THE AUTHORITIES BE LOW, THEREFORE, GROUND NO. 5 OF THE REVENUE DOES NOT SURVIVE FOR ADJUDICATION AN D WE DISMISS THE SAME. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS POSED OF AND DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17.01.2014 SD/- SD/- ( J.S. REDDY ) (CHANDRA MOHAN G ARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 17 TH JANUARY, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORD ER ASSTT. REGISTRAR