ITO, Sirhind V. M/s Singla Concast Pvt. Ltd., Mandi Gobindgarh

ITA 403/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5207 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 392/CHD/2017 ASSESSMENT YEAR: 2011-12 THE ITO, WARD-1, VS. M/S DHIMAN STEEL ROLLING MIL LS MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AAAFD8767F ITA NO. 393/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S DASHMESH ALLOYS, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AAFFD3541G ITA NO. 396/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S SUNSHINE STEEL CORPORATI ON, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. ABJFS7367L ITA NO. 399/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S MANDI ALLOYS PVT. LTD., MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AADCM9372M 2 ITA NO. 401/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S PREM STEEL & METALS PVT. LTD, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AACCP2920R & ITA NO. 402/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S PUNJAB STEELS, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AAEEP1241Q APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. ASHOK GOYAL ITA NO. 395/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S ROYAL STEEL ROLLING MILL S, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AACFR9292D APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. DEEPAK AGGARWAL ITA NO. 400/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S SHIV SARASWATI STEEL STRIP S PVT. LTD, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AAFCS1234G & 3 ITA NO. 403/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, WARD-1, VS. M/S SINGLA CONCAST PVT. LTD. , MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN NO. AALCS7248E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : NONE DATE OF HEARING : 26.04.2017 DATE OF PRONOUNCEMENT : 28.04.2017 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. 2. SINCE FACTS AND ISSUE INVOLVED IN ALL THE APPEAL S ARE IDENTICAL AND THE SAME WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 3. BEFORE PROCEEDINGS FURTHER, WE DEEM IT FIT TO ME NTION HERE THAT IN ITA NO. 393/CHD/2017, A REQUEST FOR ADJOURNMENT HAS BEEN RECEIVED WHEREAS IN ITA NOS. 400/CHD/2017 AND 403/CHD/2017, NO ONE HAS COME PRESENT DESPITE NOTICE. HOWEVER, SINCE THE MATTER I N OTHER APPEALS IS 4 ADEQUATELY REPRESENTED BY THE COUNSELS OF THE ASSES SEE AND SINCE ALL THE APPEALS HAVE BEEN FILED BY THE REVENUE, HENCE, WE P ROCEED TO DECIDE ALL THE APPEALS INCLUDING ITA NOS. 393/CHD/2017, 400/CH D/2017 AND 403/CHD/2017, BEING IDENTICAL, THROUGH THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, THE FACTS HAVE BEEN TAKEN FROM ITA NO. 403/CHD/2017. 4. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE COMPANY RUN A FURNACE UNIT AND IS ENGAGED IN THE PRODUCTION OF INGOTS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF DAILY PRODUCTION OF FINISHED GOODS AS WELL AS THE DETAILS OF THE MANUFACTURING PROCESS INVOLVED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE AMOUNT OF ELECTRICITY CON SUMED WAS 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 ASSESSING OFFICER ANALYZ ED THE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE PRODUCTION OF FINISHED GOODS AND OBSERVED THAT THERE WERE WIDE VARIATION IN RATIO OF ELECTRICITY U NITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODUCED DURING THE Y EAR. HE OBSERVED THAT THE LOWEST UNITS CONSUMED FOR PRODUCTION OF ONE MET RIC TON OF FINISHED GOODS WERE 1117.17 UNITS AND THE HIGHEST ELECTRIC U NITS CONSUMED FOR PRODUCTION OF ONE METRIC TON OF FINISHED GOODS WERE 1188.12 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 FINISHED GOOD S, WHEREAS ON SOME OTHER DAYS, ELECTRIC UNITS CONSUMED WERE VERY HIGH WHEREAS THE FINISHED 5 GOODS PRODUCED WERE VERY LESS GIVING A VERY HIGH VA LUE OF ELECTRIC UNITS CONSUMED PER METRIC UNIT OF FINISHED GOODS. HE FURT HER OBSERVED THAT EVEN ON SOME DAYS THOUGH THERE WAS ELECTRICITY CONSUMPTI ON YET NO PRODUCTION WAS SHOWN. 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, OBSERV ED THAT IT INDICATED THAT THE DAILY PRODUCTION RECORDED BY THE ASSESSEE OF TH E FINISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED THAT THE DATA RELATING TO THE DAILY PRODUCTION HAD BEEN MAINTAINED AS PER ACTUAL PRODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT ON VARIOUS FACTS AS DETAI LED IN HIS REPLY DATED 16.3.2015 WHICH HAS BEEN REPRODUCED BY THE ASSESSIN G OFFICER IN THE ASSESSMENT ORDER DATED 26.3.2015. 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 T O FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE, THE REAFTER ESTIMATED THE INCOME OF THE ASSESSEE ON THE BASIS OF MINIMUM VALU ATION OF AVERAGE OF ELECTRIC UNIT CONSUMED PER METRIC TON OF FINISHED G OODS PRODUCED FOR OVER THE PERIOD OF 10 DAYS. HE TOOK THE LOWER AVERAGE VA LUE OF ELECTRIC UNITS CONSUMED PER METRIC TON OF AVERAGE FINISHED GOODS O VER A PERIOD OF 10 DAYS AND ON THIS BASIS, AND CALCULATED THE ACTUAL MONTH WISE PRODUCTION 6 OF THE ASSESSEE. HE COMPARED THE SAME WITH THAT SHO WN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE UNACCOUNT ED PRODUCTION FOR EACH MONTH. THEREAFTER, ON THE BASIS OF AVERAGE SALES R ATE, THE VALUE OF TOTAL UNACCOUNTED PRODUCTION WAS ESTIMATED. THEN ADOPTING THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE, THE UNACCOUNTED PROFIT OUT O F THE UNACCOUNTED PRODUCTION WAS WORKED OUT. SECONDLY THE PEAK UNACCO UNTED PRODUCTION FOR THE RELEVANT MONTH WAS DETERMINED AND BY MULTIPLYIN G THE AVERAGE SALE RATE OF FINISHED GOODS, THE UNACCOUNTED INVESTMENT WAS W ORKED OUT. THE ASSESSING OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INCOME OF THE ASSESSEE OUT OF THE UNACCOUNTED PRODUCTION AT R S. 86 , 88,365/- 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). 6. 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 COMMITTE WAS ASSISTED 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 7 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 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. 8 7. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER, THE REVENUE HAS COME IN APPEAL BEFORE US. 8. 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. 9. THE LD. COUNSEL HAS STATED THAT THIS MATTER NEED NOT TO BE RESTORED IN THE PRESENT APPEALS AS THE LD. CIT(A) WHILE DECIDIN G THE ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INT ERNAL GUIDELINES OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONE R OF INCOME TAX, PATIALA. THAT THE COMMITTEE SO CONSTITUTED WAS A BR OAD BASED MULTI MEMBER BODY HAVING ADDITIONAL COMMISSIONER OF INCOM E TAX, MANDI GOBINDGARH AS ITS HEAD AND ALL THE ASSESSING OFFICE RS OF THE RANGE AS ITS 9 MEMBERS. IT WAS ALSO ASSISTED BY THE EXPERTS OF THE NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDU STRY REPRESENTATIVES. THE LD. CIT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTEE. THE SAME HAS ALREADY BEEN FOLLOWED BY TH E ASSESSING OFFICER IN SUBSEQUENT ASSESSMENT YEAR. CONSIDERING THE ABOV E FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHILE DIRECTING THE ASSESSING OFFICER TO ACCEPT THE BOOKS RESULTS SHOWN BY THE ASSESSEE AND TO DELETE THE ADDITIONS MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PROFITS / UNACCOUNTED INVEST MENT MADE ON ESTIMATION BASIS AS DISCUSSED ABOVE. THE ORDER OF T HE CIT(A) IS, THEREFORE, UPHELD. 10. SINCE THE FACTS AND ISSUE INVOLVED IN ALL THE O THER 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. 11. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.04.2017 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH APRIL, 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 10