Rank Technochem Industries, Ahmedabad V. Income Tax Officer, Godhra

ITA 3459/AHD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94419 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 26-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES KURIAN
• Assessee Lawyers: SAKAR SHARMA

Judgement Text

ITA NO .3459 /AH D/ 20 1 4 ASSESSMENT YEAR: 2 0 0 6 - 07 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO. 3459 / AHD / 2 0 1 4 ASSESSMENT YEAR: 200 6 - 07 RANK TECHNOCHEM INDUSTRIES, ....... .. . ..... APPELLANT BEHIND SHRI GIRIRAJ PLY & BO ARD INDUSTRIES, VAVDIA BAZAR, GODHRA. [PAN A AHER 5033 K ] VS. INCOME TAX OFFICER, .......... ..................RESPONDENT WARD 2, GODHRA. APPEARANCES BY: SAKAR SHARMA FOR THE APPELLANT JAMES KURIAN FOR THE RESPONDENT DATE OF CONCLUDING THE HEA RING : SEPTEMBER 8 TH , 201 5 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 15 TH , 2015 O R D E R PER PRAMOD KUMAR AM: 1. GRIEVANCE RAISED IN THIS APPEAL, FILED BY THE ASSESSEE AND DIRECTED AGAINST LD CIT(A) S ORDER DATED 1 ST OCTOBER , 201 4 FOR THE ASSESSMENT Y EAR 200 6 - 07 , IS AS FOLLOWS : - THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING AD D ITION ON RS.2,16,445/ - ON ACCOUNT OF ALLEGED SUPPRESSION IN PRODUCTION. 2. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF ORGANIC/INORGANIC SURFACTANTS FOR PAINT, LEATHER AND COSMETICS INDUSTRIES. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ITA NO .3459 /AH D/ 20 1 4 ASSESSMENT YEAR: 2 0 0 6 - 07 PAGE 2 OF 4 NOTICED T HAT THE ELECTRICITY CONSUMPTION FOR THE MONTH OF JANUARY 2006, AT RS. 26,730/ - , WA S ALMOST THREE TIMES THE AVERAGE MONTHLY ELEC TR ICITY CONSUMPTION. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN REASONS FOR ELECTRICITY CONSUMPTION, AND LINKED THE SAME TO PRODUCTION. THE ASSESSEE S CLAIM THAT THIS V ARIATION WAS DUE TO PRODUCTION OF RANK C IDE CDM WAS REJECTED A S UNSUS T AINED. ACCORDINGLY, THE ASSESSING OFFICER PROCEEDED TO MAKE A N ADDITION OF RS.2,16,445/ - ON ACCOUNT OF SUPPRESSED OBSERVATION BY JUSTIFYING THE SAME AS FOLLOWS : - - THE ASSESSEE COULD N OT PROVE THAT THERE WAS WASTE OF POWER BY ELECTRICITY FAULT OR FAULTY METER. - THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THAT THE CONSUMPTION OF POWER WAS ATTRIBUTABLE TO PRODUCTION OF RANK CIDE TCM . - THE ASSESSEE COULD NOT PRODUCE BATCH WISE CONSUMPTI ON OF INGREDIENTS TO PROVE THAT THE CHEMICAL RANK CIDE TCM WAS PRODUCED DURING THE BILLING PERIOD OF JANUARY BILL IN VIEW OF THE ABOVE, THE ONLY ALTERNATIVE END RESULT OF POWER CONSUMPTION CAN ONLY BE PRODUCTION WHICH WAS NOT REPORTED BY THE ASSESSEE. I T HAS BEEN HELD IN 26 ITR 775 & 27 ITR 126 (SC) THAT THE ITO IS NOT FETTERED BY TECHNICAL RULES OF EVIDENCE AND PLEADINGS AND HE IS ENTITL E D TO A CT ON MATERIAL WHICH MAY NOT BE ACCEPTED AS EVIDENCE IN A CO UR T OF LAW. IN A CA S E OF CIRCUMSTANTIAL EVIDENCE THE TOTALITY OF THE CIRCUMSTANCES IS TO BE CONSIDERED. IN CASE OF EXCESS UNREPORTED PRODUCTION, THERE COULD NOT BE ANY EVIDENCE EXCEPT CIRCUMSTANTIAL EVID ENCE AS NARRATED PARA - 2(B) ABOVE. IT IS ALSO WORTHWHILE TO NOTE HERE THAT IN THE CASES OF EXCESS CON SUMPTION OF POWER (ON THE BASIS OF SUCH CASE REPORTED BY THE ELECTRICITY BOARD) THE DEPARTMENT HAS TO ADOPT THE METHOD OF ESTIMATION OF PRODUCTION ON THE BASIS OF AVERAGE PRODUCTION PER UNIT OF POWER CONSUMED IN EXCESS. C. I THEREFORE ESTIMATE EXCESS PROD UCTION OF CHEMICALS ON THE BASIS OF AVERAGE CONSUMPTION OF POWER CORRESPONDING TO AVERAGE PRODUCTION OF CHEMICALS AND THEIR AVERAGE SALE PRICE AS UNDER : ITA NO .3459 /AH D/ 20 1 4 ASSESSMENT YEAR: 2 0 0 6 - 07 PAGE 3 OF 4 EXCESS PRODUCTIO N CORRESPONDING TO CONSUMPTION OF POWER IN PERCENTAGE AS PER B(II) ABOVE. 29% - 11 .92 = 17.08% IN T HE MONTH OF JANUARY ROUNDED OFF TO 12.5% FOR MARGIN ON ACCOUNT OF ESTIMATION AND ARRIVE AT REASONABLE ESTIMATION. ESTIMATED PRODUCTION IN KG . @ 12.5% ON 23721 + 10% =KG 26686 EXCESS PRODUCTION IN KG . (26686 ESTIMATED 23721 REPORTED) = 2965 EXCESS PRODUCTION IN RUPEE @ AVERAGE 73 RS P ER KG . RS.2,16,445 IN VIEW OF THE ABOVE, AN AMOUNT OF RS.2,16,445/ - IS ESTIMATED AS EXCESS PRODUCTION ON ACCOUNT OF FAILURE ON PART OF THE ASSESSEE TO FURNISH DETAILS OF PRODUCTION CORRESPOND ING TO POWER CONSUMPTION SPECIALLY IN THE MONTH OF JANUARY. THE ABOVE IS ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FUR THER APP EAL B E FORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUS E D THE MATERIAL ON RECORD, WE ARE UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THE ACTION OF THE A UTHORITIES BELOW . THE EXPLANATION OF THE ASSESSEE, THOUGH NOT PROVED TO THE HILT, FOR VARIATION IN ELECTRICITY CONSUMPTION WAS A REASONABLE EXPLANATION WHICH COULD NOT H AVE BEEN THE BASIS OF REJECTING TH E BOOKS OF ACCOUNT . GIVEN THE SCALE OF OPERATIONS, IT MAY NOT H A VE BEEN POSSIBLE FOR THE ASSESSEE TO KEEP QUANTITATIVE RECORDS TO THE SATISFACTION OF THE AUTHORITIES BELOW, BUT THEN THERE IS NO COGENT BASIS FOR BRUSHING ASIDE TH E EXPLANATION THAT THE AVERAGE ELECTRICITY CONS UMPTION (ELECTRICITY UNITS/KG. O F PRODUCTION) FOR OTHER CHEMICALS IS 0.1521, WHEREAS THE SAME FOR RANK C IDE TCM I S 20 (WHICH IS 131.49 TIMES OF ORDINARY CHEMICALS) . A CO - ORDINATE BENCH DECISION, IN THE CASE OF CENTURY TILES LTD. V S. JCIT [(2014) 51 TAXMANN.COM 515 (AHD)], ALSO SUPPORTS T HE ASSESSEE S CASE. ITA NO .3459 /AH D/ 20 1 4 ASSESSMENT YEAR: 2 0 0 6 - 07 PAGE 4 OF 4 5. IN VIEW OF THE S E DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DELETE THE IMPUGNED ADDITION. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF SEPTEMBER, 2015. SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD , THE 15 TH DAY OF SEPTEMBER , 201 5 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD