ITO, Sirhind V. M/s Vishwanath Industries, Mandi Gobindgarh

ITA 601/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5158 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTALDR
• Assessee Lawyers: ASHISH
• Keywords: Rejection of books of accounts; Unexplained investment; Income from undisclosed sources
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA,ACCOUNTANT MEMBER ITA NO. 602/CHD/2017 ASSESSMENT YEAR : 2012-13 THE ITO, VS M/S JAIN ALLOYS, WARD 2, TALWARA ROAD, MANDI GOBINDGARH. MANDI GOBINDGARH. PAN: AAAFJ8099E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL,DR RESPONDENT BY : SHRI ASHISH & ITA NO. 601/CHD/2017 ASSESSMENT YEAR : 2012-13 THE ITO, VS M/S VISHWANATH INDUSTRIE S, WARD 2, C/O JAI INDUSTRIES, MANDI GOBINDGARH. G.T.ROAD, KHANNA SIDE, (HQ-SIRHIND) NEAR ALLAHABAD BANK, MANDI GOBINDGARH. PAN: AAGFV3631C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL,DR RESPONDENT BY : NONE & ITA NO. 600/CHD/2017 ASSESSMENT YEAR : 2012-13 THE ITO, VS M/S MEGHA MULTIMETALS P.LTD. WARD 2, G.T.ROAD, NEAR RAM BHAWAN, MANDI GOBINDGARH. MANDI GOBINDGARH. HQ SIRHIND. PAN: SSBCM1593L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL,DR RESPONDENT BY : NONE DATE OF HEARING : 01.06.2017 DATE OF PRONOUNCEMENT : 02.06.2017 2 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE CAPTIONED APPEALS RELATING TO DIFFERENT A SSESSEES HAVE ARISEN FROM SEPARATE ORDERS OF COMMISSIONER O F INCOME TAX (APPEALS), [HEREINAFTER REFERRED TO AS CIT(A)] PATI ALA. 2. SINCE FACTS AND ISSUE INVOLVED IN ALL THE APPEAL S ARE IDENTICAL AND THE SAME WERE HEARD TOGETHER, THESE ARE BEING D ISPOSED OF BY THIS COMMON ORDER. 3. BEFORE PROCEEDINGS FURTHER, WE DEEM IT FIT TO ME NTION HERE THAT IN ITA NO. 601/CHD/2017, A REQUEST FOR ADJOURNMENT HAS BEEN RECEIVED WHEREAS IN ITA NO. 600/CHD/2017 NO ONE HAS COME PRESENT DESPITE NOTICE. HOWEVER, SINCE THE MATTER IN OTHER APPEALS IS ADEQUATELY REPRESENTED BY THE COUNSELS OF THE ASSES SEE AND SINCE ALL THE APPEALS HAVE BEEN FILED BY THE REVENUE, HENCE, WE PROCEED TO DECIDE ALL THE APPEALS INCLUDING ITA NOS. 601/CHD/2 017 AND 600/CHD/2017, BEING IDENTICAL, THROUGH THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, THE FACTS HAVE BEEN TAKEN FROM ITA NO.602/CHD/2017. 4. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE FIRM RUNS A ROLLING MILL WHEREIN IRON AND STEEL PRODUCTS ARE MANUFACTURED. 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 FURTHER OBSERVED TH AT THE AMOUNT OF ELECTRICITY CONSUMED WAS DIRECTLY RELATED TO THE PR ODUCTION OF 3 FINISHED GOODS. IN ORDER TO CO-RELATE THE CONSUMPTI ON OF ELECTRICITY VIS--VIS PRODUCTION SHOWN, THE ASSESSING OFFICER G ATHERED INFORMATION REGARDING THE CONSUMPTION OF ELECTRICIT Y FROM THE ELECTRICITY BOARD. THE ASSESSING OFFICER ANALYZED T HE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE PRODUCTION OF FIN ISHED GOODS AND OBSERVED THAT THERE WERE WIDE VARIATION IN RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODU CED DURING THE YEAR. HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTR IC UNITS CONSUMED WERE VERY LOW WHEREAS FINISHED GOODS PRODUCED WERE VERY HIGH GIVING A VERY LOW VALUE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINISHED GOODS, WHEREAS ON SOME OTHER DAYS, ELECTRI C 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 FURTHER OBSERVED THAT EVEN ON SO ME DAYS THOUGH THERE WAS ELECTRICITY CONSUMPTION YET NO PRODUCTION WAS SHOWN. HE FURTHER NOTED THAT OTHERWISE ON OTHER DAYS, THERE W AS ALSO A BALANCE AND CONSISTENCY IN CONSUMPTION OF ELECTRIC UNITS VI S-A-VIS PRODUCTION OF FINISHED GOODS. HE, THEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTION RECORDED BY THE ASSESSEE OF THE FI NISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED T HAT THE DATA RELATING TO THE DAILY PRODUCTION HAD NOT BEEN MAINT AINED AS PER ACTUAL PRODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE AS SESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT O N 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 4 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 FIGU RES 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 PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE, THEREAFTER ESTIMATED THE INCOME OF THE ASSESSEE ON THE BASIS OF MINIMUM VALUATION OF AVERAGE OF ELECTR IC UNIT CONSUMED PER METRIC TON OF FINISHED GOODS PRODUCED FOR OVER THE PERIOD OF 30 DAYS. HE TOOK THE LOWER AVERAGE VALUE OF ELECTRIC UNITS CONSUMED PER METRIC TON OF AVERAGE FINISHED GOODS OVER A PERIOD OF 30 DAYS AND ON THIS BASIS, AND CALCULATED THE ACTUAL MONTH WISE PRODUCTION OF THE ASSESSEE. HE COMPARED THE SAME WITH THAT SHOWN IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE UNACCOUNT ED PRODUCTION FOR EACH MONTH. THEREAFTER, ON THE BASIS OF AVERAGE SA LES RATE, THE VALUE OF TOTAL UNACCOUNTED PRODUCTION WAS ESTIMATED. THEN ADOPTING THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE, THE UNACCO UNTED PROFIT OUT OF THE UNACCOUNTED PRODUCTION WAS WORKED OUT. SECONDLY THE PEAK UNACCOUNTED PRODUCTION FOR THE RELEVANT MONTH WAS D ETERMINED AND BY MULTIPLYING THE AVERAGE SALE RATE OF FINISHED GO ODS, THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THE ASSESSI NG OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INCOME OF THE ASSESSEE OUT OF THE UNACCOUNTED PRODUCTION AT RS. 8320135/- AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. 5 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) T HAT SUBSEQUENT TO THE PASSING OF THE ABOVE STATED IMPUGNED ASSESSMENT ORDER, A DETAILED STUDY WAS CARRIED OUT BY A COMMITTEE HEADED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE, MANDI GOBINDGARH HAVING ALL THE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. THE COMMITTEE WAS ASSISTED BY THE EXPERTS FROM THE NISST (NATIONA L INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY) AND ALSO THE INDUSTRY R EPRESENTATIVES. 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 SHOULD BE ACCEPTED. ACCORDINGLY, ITS BOOK RESULTS W ERE ACCEPTED FOR THE ASSESSMENT YEAR 2013-14. IT WAS, THEREFORE, PLE ADED THAT ITS BOOK RESULTS FOR THE ASSESSMENT YEAR 2012-13 SHOULD ALSO BE ACCEPTED AND CONSEQUENTLY, THE ADDITION SHOULD BE DELETED. THE L D. CIT(A) GOT VERIFIED FROM THE ASSESSING OFFICER THE ABOVE CONTE NTIONS OF THE ASSESSEE WHICH WAS REPORTED TO BE CORRECT BY THE AS SESSING OFFICER. THE LD. CIT(A) THEREAFTER HELD THAT ONCE AN ISSUE HAS BEEN DECIDED ON MERITS IN A SUBSEQUENT YEAR, IT WOULD NOT BE APP ROPRIATE TO TAKE A DIFFERENT VIEW FOR THE YEAR UNDER CONSIDERATION. HE , THEREFORE, RELYING UPON THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA HELD THAT AS DE CIDED BY THE COMMITTEE, THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISH ED GOODS PRODUCED 6 FROM THE AVERAGE WORKED OUT ON YEARLY BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVERSE COGNIZANCE. HE AC CORDINGLY HELD THAT SINCE PURSUANT TO THE REPORT OF THE COMMITTEE, THE ASSESSING OFFICER HAS ALREADY FOLLOWED THIS NORM WHILE MAKING THE ASSESSMENT IN SIMILAR CASES AND IN SAME SET OF CIRCUMSTANCES H AS ACCEPTED THE BOOKS RESULTS SHOWN BY THE ASSESSEE WHICH INCLUDED THE ASSESSEE AS WELL, HENCE, HE FOLLOWING THE PRINCIPLE OF CONSISTE NCY LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CAS E 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 CONSIDERATION NEED TO BE ACCEPTED, AS WELL. HE THER EFORE, SET ASIDE THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BO OKS OF ACCOUNT AND DIRECTED THE ASSESSING OFFICER TO ACCEPT THE BOOK R ESULTS SHOWN BY THE ASSESSEE AND DELETED THE ADDITIONS SO MADE BY T HE ASSESSING OFFICER ON ESTIMATION BASIS. 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 ADDITIONS MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS AS DIS CUSSED ABOVE WERE UPHELD BY THE CONCERNED CIT(A), THE ASSESSEES PREFE RRED APPEALS BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VIDE ITS COM MON ORDER DATED 14.2.2017, PASSED IN A BUNCH OF ABOUT 85 APPEALS IN THE CASE OF M/S MODI OIL & GENERAL MILL, MANDI GOBINDGRH AND OTHERS IN ITA NO. 149/CHD/2016 AND OTHERS WHILE OBSERVING THAT CONSEQ UENT TO THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPA L, COMMISSIONER 7 OF INCOME TAX, PATIALA SOME INTERNAL GUIDELINES REG ARDING ACCEPTABILITY OF VARIATION UPTO 15% HAVE BEEN ISSUE D AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE IN SUB SEQUENT YEARS BY THE ASSESSING OFFICER, HAS REMANDED THE MATTER TO T HE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GUIDELINES ISSUED BY THE PRINCIPAL, 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) W HILE DECIDING THE ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTED B Y THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA. THAT THE COMMI TTEE SO CONSTITUTED WAS A BROAD BASED MULTI MEMBER BODY HAV ING ADDITIONAL COMMISSIONER OF INCOME TAX, MANDI GOBINDGARH 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 REPRESENT ATIVES. THE LD. CIT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMP TION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTEE. HE HAS ALSO OBSERVED THAT PURSUANT TO TH E REPORT OF COMMITTEE, THE ASSESSING OFFICERS HAVE ALSO FOLLOW ED THIS NORM WHILE MAKING ASSESSMENT IN SIMILAR TYPE OF CASES AN D HAVE ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSES. CONSIDERIN G THE ABOVE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHILE DIRECTING THE ASSESSING OFFICER TO ACC EPT THE BOOKS RESULTS SHOWN BY THE ASSESSEE FOR THIS YEAR ALSO AN D TO DELETE THE 8 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, THEREF ORE, UPHELD. 10. SINCE THE FACTS AND ISSUE INVOLVED IN ALL THE O THER CAPTIONED APPEALS ARE IDENTICAL, HENCE, IN VIEW OF OUR FINDIN GS GIVEN ABOVE, WE DO NOT FIND ANY MERIT IN ALL THE APPEALS OF THE REV ENUE 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 2 ND JUNE,2017. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 ND JUNE,2017 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR