Sh Ramesh Kumar Dudani, Mohali V. DCIT, Circle -6(1), Mohali

ITA 589/CHANDI/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1489 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 30-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Rejection of books of accounts; Unexplained investment
• Section: 144; 145(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, SMC, CHANDIGARH , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 581/CHD/2019 / ASSESSMENT YEAR : 2013-14 M/S MAHADEV STEEL INDUSTRIES, AMLOH ROAD, MANDI GOBINDGARH VS. THE ITO, WARD-1, MANDI GOBINDGARH ./PAN NO. AABFM8662K / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI ASHWANI KUMAR, CA ' ! / REVENUE BY : SH. MANJIT SINGH, CIT DR # $ % /DATE OF HEARING : 07.11.2019 &'() % / DATE OF PRONOUNCEMENT : 07.11.2019 / ORDER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 08.03.2019 OF THE COMMISSIONER OF INCO ME TAX (APPEALS)- 1, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, LUD HIANA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE L EARNED ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT S BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE LEARNED ASSESSING OFFICER IN MAKING AN ADDITION OF RS. ITA NO. 581-CHD-2019- M/S MAHADEV STEEL INDUSTRIES, MANDI GOBINDGARH; 2 35,84,240/- ON ACCOUNT OF ALLEGED UNACCOUNTED INVES TMENT IN ALLEGED UNACCOUNTED PRODUCTION MADE WITHOUT ANY BAS IS. 3. THAT THE LEARNED CIT(A) FURTHER GRAVELY ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN MAKING A N ADDITION OF RS. 1,46,653/- ON ACCOUNT OF ALLEGED UNACCOUNTED PR OFIT OUT OF ALLEGED UNACCOUNTED PRODUCTION PARTICULARLY WHEN TH E ENTIRE CALCULATION OF PRODUCTION IS BASED ON ASSUMPTION, S URMISES AND CONJECTURES. 4. THAT HE WAS FURTHER NOT JUSTIFIED IN NOT ADJUDIC ATING THE GROUND RELATING TO ALLEGED UNACCOUNTED INVESTMENT IN ALLEG ED UNACCOUNTED PRODUCTION FOR WHICH CREDIT WAS GIVEN B ECAUSE OF TELESCOPING. 3. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF STEEL ROLLED PRODUCTS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF DA ILY PRODUCTION OF FINISHED GOODS AS WELL AS THE DETAILS OF THE MANUFA CTURING PROCESS INVOLVED. THE ASSESSING OFFICER OBSERVED THAT THE A MOUNT OF ELECTRICITY CONSUMED WAS DIRECTLY RELATED TO THE PR ODUCTION OF FINISHED GOODS. IN ORDER TO CO-RELATE THE CONSUMPTION OF EL ECTRICITY VIS--VIS PRODUCTION SHOWN, THE ASSESSING OFFICER GATHERE D INFORMATION REGARDING THE CONSUMPTION OF ELECTRICITY FROM THE ELECTRICITY BOARD. THE ASSESSING OFFICER ANALYZED THE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE PRODUCTION OF FINISHED GOODS AND OBSE RVED THAT THERE WERE WIDE VARIATIONS IN RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODUCED DURING THE Y EAR. HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTRIC UNITS CONSUMED WERE VERY LOW ITA NO. 581-CHD-2019- M/S MAHADEV STEEL INDUSTRIES, MANDI GOBINDGARH; 3 WHEREAS FINISHED GOODS PRODUCED WERE VERY HIGH GIVI NG A VERY LOW VALUE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINI SHED GOODS, WHEREAS ON SOME OTHER DAYS, ELECTRIC UNITS CONSUMED WERE VE RY HIGH WHEREAS THE FINISHED GOODS PRODUCED WERE VERY LESS GIVING A VERY HIGH VALUE OF ELECTRIC UNITS CONSUMED PER METRIC UNIT OF FINIS HED 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 A ND CONSISTENCY IN CONSUMPTION OF ELECTRIC UNITS VIS-A-VIS PRODUCTION OF FINISHED GOODS. HE, THEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTION RECORDED BY THE ASSESSEE OF THE FINISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED THAT THE DATA RELATING TO THE DAILY PRODUCTION HAD NOT BEEN MAINTAINED AS PER ACTUAL PR ODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT ON VARIOUS FACTORS AS DETAILED IN HIS REPLY WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFFI CER, HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY OF THE ASSESSEE. HE ULTIMATELY HELD THAT THE ASSESSEE COMPANY WAS INVOLVED IN UNACCOUNT ED PRODUCTION OF FINISHED GOODS WHICH RESULTED IN UNACCOUNTED SALES AND PURCHASES. HE, THEREFORE, HELD THAT THE SALE AND PURCHASE FIGURES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CORRECT AND HE ACC ORDINGLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING T HE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHOR T 'THE ACT') AND ITA NO. 581-CHD-2019- M/S MAHADEV STEEL INDUSTRIES, MANDI GOBINDGARH; 4 PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THEREAFTER WORKED OUT THE UNACCOUNT ED INCOME OF THE ASSESSEE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN UN ACCOUNTED PRODUCTION AT RS.35,84,240 /- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. HE ALSO MADE AN ADDITION OF AN AMOUNT OF RS. 1,46,653/- ON ACCOUNT OF UNACCOUNTED PROFIT ON SALE OF UNACCOU NTED PRODUCTION. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE RAISED VIDE ABOVE GROUNDS IS SQUARELY CO VERED BY THE EARLIER ORDER OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESS EE FOR THE PRECEDING ASSESSMENT YEAR 2012-13, VIDE ORDER DATED 30.09.201 9 PASSED IN ITA NO. 69/CHD/2019. 5. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) BUT REMAINED UNSUCCESSFUL. 6. THE LD. DR HAS ALSO FAIRLY AGREED THAT THE ISSU E IS COVERED BY THE EARLIER ORDER OF THE TRIBUNAL DATED 30.09.2019. 7. WE FIND THAT ON IDENTICAL FACTS AND CIRCUMSTANCE S, SIMILAR ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH OF THE TR IBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2013-14 VIDE ORDER DATED 30.09.2019 , WHEREUPON, AFTER DUE DELIBERATIONS, THE APPEAL OF THE ASSESSEE HAS BEEN ALLOWED PARTLY. THE RELEVANT PAR T OF THE ORDER DATED ITA NO. 581-CHD-2019- M/S MAHADEV STEEL INDUSTRIES, MANDI GOBINDGARH; 5 30.09.2019 PASSED IN ITA NO.69/CHD/2019, IN THE CAS E OF THE ASSESSEE IS REPRODUCED AS UNDER:- 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE VARIATION UPTO 15% AS DECIDED BY THE EXPERT COMMITTEE CONSTITUTED BY THE DEPARTMENT IS TO BE IGNORED UNDER THE CIRCUMSTANCES, THE ESTIMATION SHOULD BE DONE TAKING INTO CONSIDERATION THE VARIATION WHICH IS OVER AND ABOVE THE BENCHMARK OF 15% AFTER IGNORING/DEDUCTING THE VARIATION UPTO 15%. WE ORDER ACCORDINGLY. HOWEVER, THE ORDER OF THE CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF UNDECLARED INVESTMENT IN STOCK IS UPHELD. WITH THE ABOVE OBSERVATIONS THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. IN VIEW OF OUR FINDINGS GIVEN IN THE AFORESAID CASE OF THE ASSESSEE (SUPRA), THIS APPEAL OF THE ASSESSEE ACCORDINGLY S TANDS PARTLY ALLOWED ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT IMM EDIATELY ON COMPLETION OF HEARING. SD/- ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 07.11.2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE ITA NO. 581-CHD-2019- M/S MAHADEV STEEL INDUSTRIES, MANDI GOBINDGARH; 6 '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR