Income Tax Officer, Mandi Gobindgarh V. M/s Prem Steel & Allied, Mandi Gobindgarh

ITA 672/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6648 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Rejection of books of accounts; Unexplained investment; Rule of consistency
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, B CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 672/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, VS. M/S PREM STEEL & ALLIED WARD-2, INDUSTRIES, MANDI GOBINDGRH MANDI GOBINDGRH PAN NO. AAJFP9572F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAVI SARANGAL RESPONDENT BY : SH. SUDHIR SEHGAL DATE OF HEARING : 28.08.2017 DATE OF PRONOUNCEMENT : 10.11.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 16.02.2017 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)], PATIALA. 2. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFAC TURING OF IRON & STEEL GOODS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSES SING 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 2 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 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 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 NOT BEEN MAINTAINED AS PER ACT UAL PRODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT ON VARIOUS FACTORS AS DE TAILED IN HIS REPLY WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY OF THE ASSESSEE. HE ULTIMATELY HELD THAT THE ASSESSEE COMP ANY WAS INVOLVED IN 3 UNACCOUNTED PRODUCTION OF FINISHED GOODS WHICH RESU LTED IN UNACCOUNTED SALES AND PURCHASES. HE, THEREFORE, HELD THAT THE S ALE AND PURCHASE FIGURES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT CO RRECT AND 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 S HORT 'THE ACT') AND PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THEREAFTER WORKED OUT THE UNACCOUNTED INCO ME OF THE ASSESSEE ON ACCOUNT OF UNACCOUNTED PRODUCTION AT RS. 5909335.74 AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4. 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 COMMITTEE WAS ASSISTE D 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 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. 4 THE ASSESSING OFFICER, HOWEVER, AFTER VERIFICATION OF THE RECORD REPORTED THAT THE YEARLY AVERAGE COMES TO 320.35 UNITS WHERE AS THE HIGHEST AVERAGE PER CYCLE OF 30 DAYS FOR THE BLOCK PERIOD AS DETAIL ED BY HIM IN ANNEXURE-E OF HIS REPORT WAS 300.62 UNITS AND THE LOWEST WAS 1 08.97 UNITS. THE VARIATION, THUS, WAS MORE THAN 15% FOR SOME OF THE BLOCK PERIOD. THE ASSESSEE IN ITS REJOINDER EXPLAINED THAT THE DEVIAT ION REPORTED BY THE ASSESSING OFFICER IN THE CHART WERE ACTUALLY LOWER THAN THAT THE LOWEST LIMIT OF 15% OF THE CONSUMPTION WHICH DENOTED EFFICIENT UTILIZATION OF THE ELECTRICITY, CONSUMED AND THAT NO ADVERSE INFERENCE CAN BE DRAWN FROM THE SAME ALSO. THE LD. CIT(A) ACCEPTED THE ABOVE CONTEN TION OF THE ASSESSEE. HE OBSERVED THAT FOR THE PERIOD THE ASSESSEE HAS SH OWN LOW CONSUMPTION OF ELECTRICITY THAT MEANS THAT THE PRODUCTION OF FINIS HED GOODS DURING THAT PERIOD WAS ON THE HIGHER SIDE. HE ACCEPTED THE ARGU MENTS OF THE ASSESSEE THAT EVEN FROM THE REVENUE POINT OF VIEW, THE LOWER CONSUMPTION OF ELECTRICITY FOR THE SAME QUANTUM OF PRODUCTION PER SE SHOULD BE VIEWED POSITIVELY AND NOT ADVERSELY. HE FURTHER OBSERVED T HAT EVEN IN HIS REMAND REPORT, THE ASSESSING OFFICER HAD ALSO NOT CALLED F OR AN ADVERSE VIEW ON THIS SCORE. THE LD. CIT(A) FURTHER OBSERVED 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 PRIN CIPAL COMMISSIONER OF INCOME TAX, PATIALA 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 BY THE ASSESSE E WHICH INCLUDED THE ASSESSEE AS WELL, HENCE, HE FOLLOWING THE PRINCIPLE OF CONSISTENCY LAID 5 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 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 THE A SSESSING OFFICER ON ESTIMATION BASIS. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE REVENUE HAS COME IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES. IT HAS BEEN BROUGHT TO OUR KNOWLEDGE THAT IN SIMILAR FACTS AN D CIRCUMSTANCES AND ON IDENTICAL ISSUES, THE MATTER HAS BEEN DELIBERATED B Y THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ITO V SHRI HARPREET SINGH, MANDI GOBINDGARH, WHEREIN THE TRIBUNAL VIDE ORDER DATED 1.8.2017, HAS UPHELD THE ORDER OF THE CIT(A), OBSERVING AS UNDER:- 6. ..AT THE OUTSET, THE LD. DR HAS BROUGHT TO O UR KNOWLEDGE THAT ON IDENTICAL ISSUES, WHEREIN THE ADD ITIONS MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS A S DISCUSSED ABOVE WERE UPHELD BY THE CONCERNED CIT(A) , THE ASSESSEES PREFERRED APPEALS BEFORE THIS TRIBUNAL AN D THIS TRIBUNAL VIDE ITS COMMON ORDER DATED 14.2.2017, PA SSED 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 PRIN CIPAL, COMMISSIONER OF INCOME TAX, PATIALA SOME INTERNAL GUIDELINES REGARDING ACCEPTABILITY OF VARIATION UPT O 15% 6 HAVE BEEN ISSUED AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE IN SUBSEQUENT YEARS BY THE AS SESSING OFFICER, HAS REMANDED THE MATTER TO THE ASSESSING O FFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCO RDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GUIDELINES IS SUED BY THE PRINCIPAL, COMMISSIONER OF INCOME TAX, PATIALA. 7. FURTHER, IN OUR VIEW THIS MATTER NEED NOT TO BE RESTORED IN THE PRESENT APPEALS AS THE LD. CIT(A) WHILE DECI DING THE ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTE D BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA. THE COMMITTEE SO CONSTITUTED WAS A BROAD BASED MULTI ME MBER BODY HAVING ADDITIONAL COMMISSIONER OF INCOME TAX, MANDI GOBINDGARH AS ITS HEAD AND ALL THE ASSESSING OFFICE RS OF THE RANGE AS ITS MEMBERS. IT WAS ALSO ASSISTED BY THE E XPERTS OF THE NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHN OLOGY (NISST) AND THE INDUSTRY REPRESENTATIVES. THE LD. C IT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTEE. HE HAS ALSO OBSERVED THAT PURSUAN T TO THE REPORT OF COMMITTEE, THE ASSESSING OFFICERS HAVE A LSO FOLLOWED THIS NORM WHILE MAKING ASSESSMENT IN SIMIL AR TYPE OF CASES AND HAVE ACCEPTED THE BOOK RESULTS SHOWN B Y THE ASSESSES. CONSIDERING THE ABOVE FACTS AND CIRCUMST ANCES, 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 ALSO AND TO DEL ETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PROFITS / UNACCOUNTED INVESTMENT MADE O N ESTIMATION BASIS AS DISCUSSED ABOVE. THE ORDER OF T HE CIT(A) IS, THEREFORE, UPHELD. 7. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL ARE IDENTICAL TO THAT IN THE CASE OF ITO VS. SHRI HARPREET SINGH, ITA NO. 912/ CHD/2017 (SUPRA). SO FAR AS THE VARIATION OF MORE THAN 15% IN SOME OF TH E BLOCK PERIODS IS 7 CONCERNED, THE LD. CIT(A) IN OUR VIEW HAS RIGHTLY HELD THAT SINCE THE CONSUMPTION WAS LOW DURING THE SAID PERIOD, HENCE, THE SAME SHOULD NOT BE VIEWED ADVERSELY AGAINST THE ASSESSEE AS THE LOW CO NSUMPTION WOULD MEAN HIGHER PRODUCTION AND RESULTING INTO THE HIGHER IN COME AND MORE TAXABLE REVENUE TO THE DEPARTMENT. IN VIEW OF THE ABOVE, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND, ACCORDINGLY W E UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.11.2017 SD/- SD/- ( ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10 TH NOV., 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR