ITO, W-2, Mandi Gobindgarh V. M/s Baba Balak Nath Steels Pvt. Ltd., Mandi Gobindgarh

ITA 44/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2940 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-08-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHARANJIT SINGH CIT DR
• Assessee Lawyers: RAJIV DATTA
• Keywords: Rejection of books of accounts; Unexplained investment; Rule of consistency; Set aside
• Section: 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO . 44/CHD/2019 / ASSESSMENT YEAR : 2012-13 THE ITO, WARD-2, MANDI GOBINDGARH VS. ! M/S BABA BALAK NATH STEELS PVT LTD., PREM NAGAR, MANDI GOBINDGARH ' # ./ PAN NO:AAACB6856A '$/ APPELLANT &' '$ / RESPONDENT ()*+ / ASSESSEE BY : SH. RAJIV DATTA, CA *+ / REVENUE BY : SHRI CHARANJIT SINGH, CIT DR , -*) .# / DATE OF HEARING : 06.08.2019 /0 *) .# / DATE OF PRONOUNCEMENT : 06.08.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 11.10.2018 OF THE LD. COMMISSIONER OF INCOME TAX, PATIALA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVE NUE IN THIS APPEAL :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTMENT AND UNACCOUNTED PROFIT OUT OF UNACCOUNTED PRODUCTION EVEN WHEN THE VARIATION OF CONSUMPTION OF ELECTRICITY WAS MORE ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 2 THAN 15%. MORE SO, THIS ACTION OF THE LD. CIT(A) IS UNCALLED FOR BEING CONTRARY TO THE OBSERVATIONS OF DIFFERENT COURTS THAT EVERY YEAR IS AN INDEPENDENT ASSESSMENT YEAR. 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND FINALLY DISPOSED OF. 3. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF STEEL PRODUCTS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER ASKED THE ASSESSEE TO FURNISH DETAILS OF DAILY PRODUCTION OF FINISHED GOODS AS WELL AS THE DETAILS OF THE MANUFACTURING PROCESS INVOLVE D. ON EXAMINATION OF THE DETAILS, THE ASSESSING OFFICER OBSERVED THAT TH E AMOUNT OF ELECTRICITY CONSUMED WAS DIRECTLY RELATED TO THE PRODUCTION OF FINISHED GOODS. IN ORDER TO CO-RELATE THE CONSUMPTION OF ELECTRICITY V IS--VIS PRODUCTION SHOWN, THE ASSESSING OFFICER GATHERED INFORMATION R EGARDING THE CONSUMPTION OF ELECTRICITY FROM THE ELECTRICITY BOA RD. THE ASSESSING OFFICER ANALYZED THE CONSUMPTION DATA OF ELECTRICIT Y VIS-A VIS THE PRODUCTION OF FINISHED GOODS AND OBSERVED THAT THER E WERE WIDE VARIATION IN RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODUCED DURING THE YEAR. HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTRIC UNITS CONSUMED WERE VERY LOW WH EREAS FINISHED ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 3 GOODS PRODUCED WERE VERY HIGH GIVING A VERY LOW VAL UE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINISHED GOODS, WHEREAS ON S OME 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 UNIT OF FINISHED GOODS. HE FURT HER OBSERVED THAT EVEN ON SOME DAYS THOUGH THERE WAS ELECTRICITY CONS UMPTION YET NO PRODUCTION WAS SHOWN. HE FURTHER NOTED THAT OTHERWI SE ON OTHER DAYS, THERE WAS ALSO A BALANCE AND CONSISTENCY IN CONSUMP TION OF ELECTRIC UNITS VIS-A-VIS PRODUCTION OF FINISHED GOODS. HE, T HEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTION RECORDE D BY THE ASSESSEE OF THE FINISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELI ABLE. HE OBSERVED THAT THE DATA RELATING TO THE DAILY PRODUCTION HAD NOT B EEN MAINTAINED AS PER ACTUAL PRODUCTION. WHEN CONFRONTED IN THIS RESPECT, 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 ASSE SSING 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 RESULTED IN UNAC COUNTED SALES AND PURCHASES. HE, THEREFORE, HELD THAT THE SALE AND PU RCHASE FIGURES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT A ND HE ACCORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY I NVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 4 ACT') AND PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THEREAFTER WORKED OUT THE U NACCOUNTED INCOME OF THE ASSESSEE ON ACCOUNT OF UNACCOUNTED PRODUCTION A ND ADDED 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 T HE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. THE COMMITTEE WAS ASSISTED BY THE EXPERTS FROM THE NISST (NATIONAL INSTITUTE OF THE S ECONDARY STEEL TECHNOLOGY) AND ALSO THE INDUSTRY REPRESENTATIVES. 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 SHOU LD BE ACCEPTED. THAT PURSUANT TO THE REPORT OF THE COMMITTEE, THE A SSESSING OFFICERS HAVE FOLLOWED THIS NORM WHILE MAKING ASSESSMENT IN SIMILAR CASES AND HAS ACCEPTED THE BOOK RESULTS IF THE VARIATION IS W ITHIN 15% WINDOW. IT WAS, THEREFORE, PLEADED THAT THE BOOK RESULTS OF T HE ASSESSEE FOR THE ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 5 ASSESSMENT YEAR 2012-13 SHOULD ALSO BE ACCEPTED AND CONSEQUENTLY, THE ADDITION SHOULD BE DELETED. THE LD. CIT(A) GOT VERI FIED FROM THE ASSESSING OFFICER THE ABOVE CONTENTIONS OF THE ASSE SSEE WHICH WAS REPORTED TO BE CORRECT BY THE ASSESSING OFFICER. TH E 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 COMMISSI ONER OF INCOME TAX, PATIALA HELD THAT AS DECIDED BY THE COMMITTEE, THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS PRODUCED FROM THE AVER AGE WORKED OUT ON YEARLY BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVERSE COGNIZANCE. HE ACCORDINGLY HELD THAT SINCE PURSUANT TO THE REPORT OF THE COMMITTEE, THE ASSESSING OFFICER HAS ALREADY FOLLOW ED THIS NORM WHILE MAKING THE ASSESSMENT IN SIMILAR CASES AND IN SAME SET OF CIRCUMSTANCES HAS ACCEPTED THE BOOKS RESULTS SHOWN IN OTHER CASES , HENCE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, HE HELD THAT THE BOOK S RESULTS SHOWN BY THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION N EED TO BE ACCEPTED, AS WELL. HE THEREFORE, SET ASIDE THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT AND DIRECTED THE ASS ESSING OFFICER TO ACCEPT THE BOOK RESULTS SHOWN BY THE ASSESSEE AND D ELETED THE ADDITIONS SO MADE BY THE ASSESSING OFFICER ON ESTIMATION BASI S. ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 6 6. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE REVENUE HAS COME IN APPEAL BEFORE US. 7. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THE TRIBUNAL IN THIS RESPECT AND HAS R ELIED UPON THE FOLLOWING RECENT DECISIONS :- I) ITO VS. AMAR ISPAT UDYOG ITA NO. 384/CHD/2017 ORDER DATED 26.10.2017 II) ITO VS. PREM STEEL & ALLIED INDUSTRIES ITA NO. 672/CHD/2017 DATED 10.11.2017 III) ITO VS SHRI HARPREET SINGH ORDER DATED 1.8.2017 - I TA NO. 912/CHD/2017 (CHANDIGARH BENCH) 8. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND FO RCE IN THE CONTENTION OF THE LD. AR. THE ISSUE IS SQUARELY COV ERED BY THE ABOVE REFERRED TO DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS SHRI HARPREET SINGH(SUPRA), WHEREIN, WHILE DISMISSING THE IDENTI CAL APPEALS OF THE REVENUE, THE TRIBUNAL HAS OBSERVED AS UNDER:- 7. . THE LD. CIT(A) WHILE DECIDING THE ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOM E TAX, PATIALA. THAT THE COMMITTEE SO CONSTITUTED WAS A BROAD BASED MULTI MEMBER BODY HAVING ADDITIONAL COMMISSIONER OF INCOME TAX, MANDI GOBINDGARH AS ITS HEAD AND ALL THE ASSESSING OFFICERS OF THE RANG E AS ITS MEMBERS. IT WAS ALSO ASSISTED BY THE EXPERTS OF THE NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDUSTRY REPRESENTATIVES . ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 7 THE LD. CIT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISH ED GOODS AS PER THE REPORT OF THE COMMITTEE. HE HAS AL SO OBSERVED THAT PURSUANT TO THE REPORT OF COMMITTEE, THE ASSESSING OFFICERS HAVE ALSO FOLLOWED THIS NOR M WHILE MAKING ASSESSMENT IN SIMILAR TYPE OF CASES AN D HAVE ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSE S. CONSIDERING THE ABOVE 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 FOR THIS YEAR A LSO AND TO DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PROFITS / UNACCOUNTED INVESTMENT MADE ON ESTIMATION BASIS AS DISCUSSED ABOVE. THE ORDER OF THE CIT(A) IS, THEREFORE, UPHELD. 9. THE FACTS AND ISSUE INVOLVED IN THE PRESENT APP EAL ARE IDENTICAL TO THAT IN THE CASES REFERRED TO ABOVE. IN VIEW OF TH E ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF CIT(A) AND, ACCORDIN GLY WE UPHOLD SAME. IN THE RESULT, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.08.2019. SD/- SD/- ( . . / N.K. SAINI) ( / SANJAY GARG) !'# / VICE PRESIDENT $% / JUDICIAL MEMBER DATED : 06 .08.2019 .. 2*&)3454) / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. &' '$ / THE RESPONDENT 3. , 6) / CIT 4. , 6) ( )/ THE CIT(A) 5. 47 &)8 , . 8 , 9:;< / DR, ITAT, CHANDIGARH 6. ;= - / GUARD FILE ITA NO. 44-CV-2018- M/S BABA BALAK NATH STEEL PVT.,LTD, GOBINDGARH 8 2 , / BY ORDER, > / ASSISTANT REGISTRAR