Deputy Commissoner of Income Tax, V. Dhiman Indusitres,

ITA 360/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6979 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: BHUPINDER SHARMA
• Keywords: Unexplained investment
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 356/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, CIRCLE, VS. M/S BHAMBRI STEEL PVT. LTD., MANDI GOBINDGARH VILLAGE TOORAN, MANDI GOBINDGARH PAN NO. AAACB6965C & ITA NO. 355/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, CIRCLE, VS. M/S RAJDHANI IRON PRODUCTS P VT LTD., MANDI GOBINDGARH VILLAGE KUKBH, MANDI GOBINDGARH PAN NO. AACCR7955A APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. BHUPINDER SHARMA ITA NO. 357/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, CIRCLE, VS. M/S VARDHMAN ADARSH ISPAT PV T.LTD., MANDI GOBINDGARH VILLAGE AMBHAY MAJRA, MANDI GOBINDGARH PAN NO. AABCV2853Q APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. TEJ MOHAN SINGH (FOR SH. ASHWANI KUMAR) 2 ITA NO. 358/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, CIRCLE, VS. M/S PRAYAG STEEL ROLLING MIL LS, MANDI GOBINDGARH BEHIND MODERN STEELS, MANDI GOBINDGARH PAN NO. AAJFP2983L APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. ASHOK GOYAL DATE OF HEARING : 12.07.2017 DATE OF PRONOUNCEMENT : 02.08.2017 & ITA NO. 360/CHD/2017 ASSESSMENT YEAR: 2012-13 THE DCIT, CIRCLE, VS. M/S DHIMAN INDUSTRIES, MANDI GOBINDGARH GURU KI NAGRI, MANDI GOBINDGARH PAN NO. AABFD7123J APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. TEJ MOHAN SINGH (FOR SH. RAJIV DUTTA) DATE OF HEARING : 13.07.2017 DATE OF PRONOUNCEMENT : 02.08.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE CAPTIONED APPEALS RELATING TO DIFFERENT A SSESSEES ARE ARISING FROM SEPARATE ORDERS OF COMMISSIONER OF INC OME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)] PATIALA. 3 2. SINCE FACTS AND ISSUE INVOLVED IN ALL THE APPEAL S ARE IDENTICAL, THESE ARE BEING DISPOSED OFF BY THIS COMMON ORDER. FOR TH E SAKE OF CONVENIENCE, THE FACTS HAVE BEEN TAKEN FROM ITA NO.356/CHD/2017. 3. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE COMPANY IS A STEEL RE-ROLLING MILL ENGAGED IN MANUFACTURING OF IRON AND STEEL PRODUCTS VIZ STRUCTURAL STEEL LIKE A NGLES, CHANNELS, FLATS, JOISTS, H.BEAMS ETC. DURING THE ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF DA ILY PRODUCTION OF FINISHED GOODS AS WELL AS THE DETAILS OF THE MANUFACTURING P ROCESS INVOLVED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE AMOUNT OF ELECTRICITY CONSUMED WAS DIRECTLY RELATED TO THE PRODUCTION OF FINISHED GOODS. IN ORDER TO CO- RELATE THE CONSUMPTION OF ELECTRICITY VIS--VIS PRO DUCTION SHOWN, THE ASSESSING OFFICER GATHERED INFORMATION REGARDING TH E CONSUMPTION OF ELECTRICITY FROM THE ELECTRICITY BOARD. THE ASSESSI NG OFFICER ANALYZED THE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE PRODU CTION OF FINISHED GOODS AND OBSERVED THAT THERE WERE WIDE VARIATION IN RATI O OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODU CED DURING THE YEAR. HE OBSERVED THAT THE ELECTRICITY CONSUMPTION PMT OF FINISHED GOODS VARIES FROM 64.32 UNITS TO 114.06 UNITS WHILE THE AVERAGE FOR THE ENTIRE YEAR IS 84.16 UNITS. HE FURTHER OBSERVED THAT ON SOME DAYS , ELECTRIC UNITS CONSUMED WERE VERY LOW WHEREAS FINISHED GOODS PRODU CED WERE VERY HIGH GIVING A VERY LOW VALUE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINISHED GOODS, WHEREAS ON SOME OTHER DAYS, ELECTRIC UNITS C ONSUMED WERE VERY HIGH WHEREAS THE FINISHED GOODS PRODUCED WERE VERY LESS GIVING A VERY HIGH 4 VALUE OF ELECTRIC UNITS CONSUMED PER METRIC UNIT OF FINISHED GOODS. HE FURTHER OBSERVED THAT EVEN ON SOME DAYS THOUGH THER E WAS ELECTRICITY CONSUMPTION YET NO PRODUCTION WAS SHOWN. HE FURTHER NOTED THAT OTHERWISE ON OTHER DAYS, THERE WAS ALSO A BALANCE AND CONSIST ENCY IN CONSUMPTION OF ELECTRIC UNITS VIS-A-VIS PRODUCTION OF FINISHED GOO DS. HE, THEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTIO N RECORDED BY THE ASSESSEE OF THE FINISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED THAT THE DATA RELATING TO THE DAILY PRODUC TION HAD BEEN MAINTAINED AS PER ACTUAL PRODUCTION. WHEN CONFRONTED IN THIS R ESPECT, THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS D EPENDENT ON VARIOUS FACTORS AS DETAILED IN HIS REPLY WHICH HAS BEEN REP RODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFF ICER, HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY OF THE ASSESSEE. HE ULTIMATELY HELD THAT THE ASSESSEE COMPANY WAS INVOLVED IN UNACCOUNTED PRODUC TION OF FINISHED GOODS WHICH RESULTED IN UNACCOUNTED SALES AND PURCH ASES. HE, THEREFORE, HELD THAT THE SALE AND PURCHASE FIGURES IN THE BOOK S OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT AND HE ACCORDINGLY REJECT ED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTI ON 145(3) OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT') AND PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THER EAFTER ESTIMATED THE INCOME OF THE ASSESSEE ON THE BASIS OF ELECTRIC UNI TS CONSUMED FOR 12 MONTHS AS PER CHART REPRODUCED IN THE ASSESSMENT OR DER. HE COMPARED THE SAME WITH THAT SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE UNACCOUNTED PRODUCTION FOR EACH MONTH. THEREAFT ER, ON THE BASIS OF AVERAGE SALES RATE, THE VALUE OF TOTAL UNACCOUNTED PRODUCTION WAS ESTIMATED IN MONETARY TERMS AND THEN ADOPTING THE GROSS PROFI T RATE SHOWN BY THE 5 ASSESSEE, THE UNACCOUNTED PROFIT OUT OF THE UNACCOU NTED PRODUCTION WAS WORKED OUT. SECONDLY, THE PEAK UNACCOUNTED PRODUCTI ON FOR THE RELEVANT MONTH WAS DETERMINED AND BY MULTIPLYING THE AVERAGE SALE RATE OF FINISHED GOODS, THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THE ASSESSING OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INVEST MENT OF THE ASSESSEE IN THE UNACCOUNTED PRODUCTION AT RS. 2,64,17,372/- AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. BEFORE LD. CIT(A), THE ASSESSEE FILED DETAILED S UBMISSIONS. IT WAS ALSO BROUGHT INTO THE KNOWLEDGE OF THE CIT(A) THAT SUBSEQUENT TO THE PASSING OF THE ABOVE STATED IMPUGNED ASSESSMENT ORD ER, A DETAILED STUDY WAS CARRIED OUT BY A COMMITTEE HEADED BY THE ADDITI ONAL COMMISSIONER OF INCOME TAX, RANGE, MANDI GOBINDGARH HAVING ALL THE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. THE COMMITTEE WAS ASSISTE D BY THE EXPERTS FROM THE NISST (NATIONAL INSTITUTE OF THE SECONDARY STEE L TECHNOLOGY) AND ALSO THE INDUSTRY REPRESENTATIVES. ON THE BASIS OF THE R EPORT OF THE COMMITTEE, IT WAS DECIDED THAT IF THE VARIATION IN THE CONSUMPTIO N OF THE ELECTRICITY IS WITHIN THE RANGE OF 15% OF THE YEARLY AVERAGE CONSU MPTION OF POWER, THE BOOK RESULTS SHOULD BE ACCEPTED. ACCORDINGLY, ITS B OOK RESULTS WERE ACCEPTED FOR THE ASSESSMENT YEAR 2013-14. IT WAS, T HEREFORE, PLEADED THAT ITS BOOK RESULTS FOR THE ASSESSMENT YEAR 2012-13 SH OULD ALSO BE ACCEPTED AND CONSEQUENTLY, THE ADDITION SHOULD BE DELETED. T HE LD. CIT(A) GOT VERIFIED FROM THE ASSESSING OFFICER THE ABOVE CONTE NTIONS OF THE ASSESSEE 6 WHICH WAS REPORTED TO BE CORRECT BY THE ASSESSING O FFICER. THE LD. CIT(A) THEREAFTER HELD THAT ONCE AN ISSUE HAS BEEN DECIDED ON MERITS IN A SUBSEQUENT YEAR, IT WOULD NOT BE APPROPRIATE TO TAK E A DIFFERENT VIEW FOR THE YEAR UNDER CONSIDERATION. HE, THEREFORE, RELYIN G UPON THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA HELD THAT AS DECIDED BY THE COMMITTEE, THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRIC ITY PER METRIC TON OF FINISHED GOODS PRODUCED FROM THE AVERAGE WORKED OUT ON YEARLY BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVER SE COGNIZANCE. HE ACCORDINGLY HELD THAT SINCE PURSUANT TO THE REPORT OF THE COMMITTEE, THE ASSESSING OFFICER HAS ALREADY FOLLOWED THIS NORM WH ILE MAKING THE ASSESSMENT IN SIMILAR CASES AND IN SAME SET OF CIRC UMSTANCES HAS ACCEPTED THE BOOKS RESULTS SHOWN BY THE ASSESSEE WHICH INCLU DED THE ASSESSEE AS WELL, HENCE, HE FOLLOWING THE PRINCIPLE OF CONSISTE NCY LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RIETA BISCUITS CO. (P) LTD [2009] 309 ITR 154 (P&H) HELD THAT THE BOOKS RESULTS SHOWN BY THE ASSESSEE COMPANY FOR THE YEAR UNDER CO NSIDERATION NEED TO BE ACCEPTED, AS WELL. HE THEREFORE, SET ASIDE THE ACTI ON OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT AND DIREC TED THE ASSESSING OFFICER TO ACCEPT THE BOOK RESULTS SHOWN BY THE ASSESSEE AN D DELETED THE ADDITIONS SO MADE BY THE ASSESSING OFFICER ON ESTIMATION BASI S. 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER, THE REVENUE HAS COME IN APPEAL BEFORE US. 7 7. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS BROUGHT TO OUR KNOWLEDGE THAT ON IDENTICAL ISSUES, WHEREIN THE ADD ITIONS MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS AS DISCUSSED ABOVE WERE UPHELD BY THE CONCERNED CIT(A), THE ASSESSEES PREFERRED APPEA LS BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VIDE ITS COMMON ORDER DATED 14.2. 2017, PASSED IN A BUNCH OF ABOUT 85 APPEALS IN THE CASE OF M/S MODI O IL & GENERAL MILL, MANDI GOBINDGRH AND OTHERS IN ITA NO. 149/CHD/2016 AND OTHERS WHILE OBSERVING THAT CONSEQUENT TO THE REPORT OF THE COMM ITTEE CONSTITUTED BY THE PRINCIPAL, COMMISSIONER OF INCOME TAX, PATIALA SOME INTERNAL GUIDELINES REGARDING ACCEPTABILITY OF VARIATION UPTO 15% HAVE BEEN ISSUED AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE I N SUBSEQUENT YEARS BY THE ASSESSING OFFICER, HAS REMANDED THE MATTER TO T HE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCO RDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GUIDELINES ISSUED BY THE PRI NCIPAL, COMMISSIONER OF INCOME TAX, PATIALA. 8. FURTHER, IN OUR VIEW THIS MATTER NEED NOT TO BE RESTORED IN THE PRESENT APPEALS AS THE LD. CIT(A) WHILE DECIDING THE ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUID ELINES OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOM E TAX, PATIALA. THE COMMITTEE SO CONSTITUTED WAS A BROAD BASED MULTI ME MBER BODY HAVING ADDITIONAL COMMISSIONER OF INCOME TAX, MANDI GOBIND GARH AS ITS HEAD AND ALL THE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. IT WAS ALSO ASSISTED BY THE EXPERTS OF THE NATIONAL INSTITUTE O F THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDUSTRY REPRESENTATIVES . THE LD. CIT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMPTION OF ELE CTRICITY PER METRIC TON 8 OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTE E. THE SAME HAS ALREADY BEEN FOLLOWED BY THE ASSESSING OFFICER IN SUBSEQUEN T ASSESSMENT YEAR. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, WE D O NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHILE DIRECTIN G THE ASSESSING OFFICER TO ACCEPT THE BOOKS RESULTS SHOWN BY THE ASSESSEE A ND TO DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PROFITS / UNACCOUNTED INVESTMENT MADE ON ESTIMATION BASIS A S DISCUSSED ABOVE. THE ORDER OF THE CIT(A) IS, THEREFORE, UPHELD. 9. SINCE THE FACTS AND ISSUE INVOLVED IN ALL THE OT HER CAPTIONED APPEALS ARE IDENTICAL, HENCE, IN VIEW OF OUR FINDINGS GIVEN ABOVE, WE DO NOT FIND ANY MERIT IN ALL THE APPEALS OF THE REVENUE AND THE SAME ARE ACCORDINGLY DISMISSED. 10. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.08.2017 SD/- SD/- (DR. B.R.R KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02 AUGUST, 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR