Dy.Commissioner of Income Tax-5, Kanpur V. M/s Mohan Steels Ltd., Unnao

ITA 591/LKW/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100487 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.591/LKW/2014 ASSESSMENT YEAR 2010-11 M/S MOHAN STEELS LTD., GAZAULI INDUSTRIAL AREA SITE NO.1, PLOT NO.1, UNNAO- 209 801 PAN AAACM 9592 Q VS DY. COMMISSIONER OF INCOME TAX - 5, KANPUR (RESPONDENT) (APPELLANT) CO NO. 41/LKO/2014 (IN ITA NO.591/LKW/2014) ASSESSMENT YEAR 2010-11 DY. COMMISSIONER OF INCOME TAX - 5, KANPUR VS M/S MOHAN STEELS LTD., GAZAULI INDUSTRIAL AREA SITE NO.1, PLOT NO.1, UNNAO- 209 801 PAN AAACM 9592 Q (RESPONDENT) (APPELLANT) SHRI AMIT NIGAM, DR APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY 19/1 1 /2015 DATE OF HEARING 31 /12/2015 DATE OF PRONOUNCEMENT O R D E R PER SUNIL KUMAR YADAV, JM. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)- II, KANPUR. THE ASSESSEE HAS ALSO FILED THE CROSS O BJECTION. SINCE, THE APPEAL AND 2 THE CO WERE HEARD TOGETHER, THESE ARE BEING DISPOSE D OF THROUGH THIS CONSOLIDATED ORDER. HOWEVER, WE WILL ADJUDICATE THEM ONE AFTER T HE OTHER. ITA NO.591/LKW/2014 2. THIS APPEAL IS PREFERRED BY THE REVENUE ON THE F OLLOWING GROUNDS: 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.44,35,531/- O UT OF POWER & FUEL WITHOUT APPRECIATING THE MERITS OF THE CASE AS WELL AS FACTS AND MATERIAL BROUGHT ON RECORD BY THEAO. 2. THAT THE CORNMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.44,35,531/- O UT OF POWER & FUEL WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO OFFER ANY EXPLANATION IN RESPECT OF THE HUGE VARIATION IN CON SUMPTION OF POWER AND FUEL PER M.T. AS COMPARED TO EARLIER YEAR. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.2,94,489/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON CAR WITHOUT APPRECI ATING THE FACT THAT THE ASSESSEE FAILED TO SUBMIT JUSTIFICATION REGARDI NG THE BUSINESS EXPEDIENCY OF THE CAR UNDER REFERENCE WITH THE ASSE SSEE'S BUSINESS. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.1,68,695/- OU T OF WORKMEN WELFARE EXPENSES WITHOUT CONSIDERING THE FACT THAT MOST OF THESE EXPENSES WERE INCURRED IN CASH AND IN ABSENCE OF PROPER VERIFICAT ION, THE SAME ARE NOT OPEN FOR VERIFICATION. 5. THAT THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS), BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF ASSESSING OFFICER BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE AND/OR ADD ANY FRESH GROUND AS AND WHEN IT IS CONSIDERED NECESSARY TO DO SO. 3. APROPOS GROUND NOS. 1 AND 2, IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER HAS NO TED THAT THE ASSESSEE HAS SHOWN EXCESS CONSUMPTION OF POWER AT THE RATE OF 1. 97 UNIT PER METRIC TONNE OF PRODUCTION, EXCESS CONSUMPTION OF FURNACE OIL AT TH E RATE OF 6.59 KG PER METRIC 3 TONNE OF PRODUCTION AND LESSER CONSUMPTION OF STEAM COAL AT THE RATE OF 23.67 KG PER METRIC TONNE OF PRODUCTION. HAVING NOTICED THAT SUBSTANTIAL VARIATION IN POWER AND FUEL CONSUMPTION IN TWO CONSECUTIVE YEARS, WHIC H IS NOT POSSIBLE FOR THE SAME SET OF PLANT AND MACHINERY, THE ASSESSING OFFICER H AS OBSERVED THAT THE ASSESSEE HAS EXAGGERATED THE CONSUMPTION OF POWER AND FUEL A ND HE ACCORDINGLY WORKED OUT THE AVERAGE RATE OF PURCHASE OF FURNACE OIL AND COA L, RESULTING INTO ADDITION OF RS.44,35,531/-. 4. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT THE ASSESSEE COMPANY IS MANUFACTURI NG TMT BARS MAINLY ON JOB WORK BASIS FOR SAIL. THE ASSESSEE HAS INSTALLED REH EATING FURNACE IN ITS MANUFACTURING UNIT AND THE BILLETS SUPPLIED BY THE SAIL ARE TREATED IN THE REHEATING FURNACE TO AN EVEN TEMPERATURE OF 1120 DEGREE CELSI US. THE REHEATING FURNACE IS A PUSHER TYPE FURNACE WHICH IS OPERATED ON FURNACE OI L AS WELL AS ON COAL GAS. THE CAPACITY OF THE FURNACE IS 40 M.T. PER HOUR. IT WAS FURTHER CONTENDED THAT THE FURNACE IS FULLY OPERATED ON THE FURNACE OIL, THEN THE MINIMUM AND MAXIMUM CONSUMPTION OF FURNACE OIL IS 800 LTRS. PER HOUR AN D 1600 LTRS. PER HOUR RESPECTIVELY, DEPENDING ON THE CAPACITY UTILIZATION. IT WAS FURTH ER EXPLAINED THAT IF FURNACE IS RUN IDLE, THE MINIMUM FUEL CONSUMPTION WILL BE 800 LTRS . PER HOUR AND IF IT IS 100% CAPACITY UTILIZATION, THE CONSUMPTION WILL BE 1600 LTRS. PER HOUR. SIMILAR IS THE POSITION WITH CONSUMPTION OF COAL. A FURNACE IS FUL LY OPERATED ON COAL, THE MINIMUM AND MAXIMUM CONSUMPTION OF COAL PER HOUR COMES TO 2 000 KGS. AND 5000 KGS RESPECTIVELY. COAL IS USED AN ALTERNATE FUEL, BECAU SE RUNNING OF FURNACE ON COAL IS NOT COST EFFECTIVE. THE ASSESSEE HAS FURNISHED THE TABLE GIVING DETAILS OF THE CAPACITY UTILIZATION, POWER AND FUEL CONSUMPTION. BEING CONV INCED WITH THE EXPLANATION OF THE ASSESSEE, THE CIT(A) DELETED THE ADDITION. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL WITH THE SUBMISSION THAT THE PLANT AND MACHINERY OF THE SAIL REMAINS TH E SAME, THEN WHY THERE IS SUBSTANTIAL VARIATION IN POWER AND FUEL CONSUMPTION IN TWO CONSECUTIVE YEARS. LD. 4 DR INVITED OUR ATTENTION TO THE CHART FURNISHED BY THE ASSESSEE WITH THE SUBMISSION THAT THE STAND TAKEN BY THE ASSESSEE IS NOT IN CONF ORMITY WITH THE CHART PRODUCED BY IT. AS PER THE CHART, WHENEVER CAPACITY UTILIZATION WAS MORE, THE CONSUMPTION OF POWER WAS ALSO INCREASED AND THESE FACTS ARE CONTRA RY TO THE STAND TAKEN BY THE ASSESSEE. LD. DR FURTHER CONTENDED THAT FIRST TIME, THE ASSESSEE HAS FILED THIS CHART ALONG WITH EXPLANATION WHICH WAS NEVER CONFRONTED T O THE ASSESSING OFFICER. MOREOVER ON TECHNICAL ISSUE, THE CIT(A) SHOULD HAVE CALLED AN EXPERT OPINION. IT WAS FURTHER CONTENDED THAT EVEN IF THE CONTENTION OF TH E ASSESSEE IS ACCEPTED THEN WHY THERE IS A FLUCTUATION IN CONSUMPTION OF POWER AND FUEL IN TWO CONSECUTIVE YEARS. IT SHOULD HAVE BEEN REMAINED THE SAME. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HAS PLACED STRONG RELIANCE UPON THE ORDER OF T HE CIT(A). IT WAS FURTHER CONTENDED THAT THE ASSESSEE HAS FURNISHED THE DETAI LED EXPLANATION BEFORE THE CIT(A) AND MOREOVER THE ASSESSING OFFICER IS NOT A TECHNICAL EXPERT TO FIND OUT THE DEFECT IN THE CONSUMPTION OF POWER AND FUEL. IF HE HAD ANY DOUBT, HE SHOULD HAVE CALLED THE COMMENTS EITHER FROM THE ASSESSEE OR FRO M AN EXPERT. BUT, HE DID NOT DO SO, WHEREAS THE CIT(A) HAS PROPERLY EXAMINED THE IS SUE. 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWE R AUTHORITIES, IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFIC ER HAS NOTED SUBSTANTIAL VARIATION IN CONSUMPTION OF POWER AND FUEL. IN THE LIGHT OF T HESE FACTS, THE CONTENTION OF THE ASSESSEE THAT HE HAD USED PARTICULAR TYPE OF MACHIN E, CANNOT BE ACCEPTED AS THE PLANT AND MACHINERY OF THE ASSESSEE REMAINED THE SA ME IN BOTH THE CONSECUTIVE YEARS. THE CONSUMPTION OF POWER AND FUEL PER METRIC TONNE SHOULD REMAIN THE SAME OR WITH THE MINOR FLUCTUATION. BUT, THERE CANNOT BE SUBSTANTIAL VARIATION IN CONSUMPTION OF POWER AND FUEL PER METRIC TONNE. WE HAVE ALSO CAREFULLY EXAMINED THE TABLE EXTRACTED BY THE CIT(A) IN HIS ORDER AND WE FIND THAT THE STAND TAKEN BY THE ASSESSEE THAT WHENEVER THE CAPACITY UTILIZATION IS MORE, CONSUMPTION IS LESS IS NOT IN CONFORMITY WITH THE DETAILS GIVEN IN THE TAB LE. 5 6.1 IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE ISSUE WAS NOT PROPERLY EXAMINED BY THE CIT(A). WE, THEREFORE, SET ASIDE HIS ORDER AND RESTORE THE MATTER TO HIS FILE WITH THE DIRECTION TO ADJUDICATE THE IS SUE AFRESH AFTER OBTAINING PROPER REPORT FROM THE TECHNICAL EXPERT IN THIS FIELD, AS THE ASSESSING OFFICER AND THE CIT(A) CANNOT BE CALLED TO BE TECHNICAL EXPERT IN THIS FIE LD. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE IN THIS REGARD AND MATTER IS RE STORED BACK TO HIS FILE WITH THE DIRECTION TO READJUDICATE IT AFRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SO FAR AS GROUND NOS. 3 AND 4 OF THE APPE AL AND SOLE GROUND IN CO ARE CONCERNED, WE FIND THAT DISALLOWANCES WERE MADE ON ADHOC BASIS HAVING NOTED THAT THERE WERE INCURRED FOR NON BUSINESS PURPOSE. WHEREA S, THE ASSESSEE IS LIMITED COMPANY AND THERE IS NO EVIDENCE THAT THE EXPENSES INCURRED FOR NON BUSINESS PURPOSE. ACCORDINGLY, WE FIND NO MERIT IN THIS GROU ND OF THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED ON THE CAPTION PAGE) SD/- SD/- (A.K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31/12/2015 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASS TT. REGISTRAR