Income Tax Officer, Mandi Gobindgarh V. M/s Chehal Indusitries Dharam Mill Road, Mandi Gobindgarh

ITA 673/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6506 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: ASHOK GERA
• Keywords: Rejection of books of accounts; Unexplained investment
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 673/CHD/2017 ASSESSMENT YEAR: 2012-13 THE ITO, VS. M/S CHEHAL INDUSTRIES, WARD-2, DHARAM MILLS ROAD, MANDI GOBINDGARH MANDI GOBINDGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : SH. ASHOK GERA DATE OF HEARING : 28.12.2017 DATE OF PRONOUNCEMENT : 28.12.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 14.02.2017 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 COMPANY IS ENGAGED IN MANUFACTURING OF IRO N & STEEL GOODS. 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 INVOLVED. THE ASSESSING OFFICER 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 2 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 DET AILED 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 UNACCOUNTED PRODUCTION OF FINISHED GOODS WHICH RESU LTED IN UNACCOUNTED SALES AND PURCHASES. HE, THEREFORE, HELD THAT THE S ALE AND PURCHASE FIGURES 3 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 OF RS. 34,92,887- 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 WHICH WAS REPORTED TO BE CORRECT BY THE ASSESSING O FFICER. THE LD. CIT(A) THEREAFTER HELD THAT ONCE AN ISSUE HAS BEEN DECIDED ON MERITS IN A 4 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 COMMISSIONER OF INCOME TAX, PATIALA HELD THAT AS DECIDED BY THE COMMITTEE, THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRIC ITY PER METRIC TON OF FINISHED GOODS PRODUCED FROM THE AVERAGE WORKED OUT ON YEARLY BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVER SE COGNIZANCE. HE ACCORDINGLY HELD THAT SINCE PURSUANT TO THE REPORT OF THE COMMITTEE, THE ASSESSING OFFICER HAS ALREADY FOLLOWED THIS NORM WH ILE MAKING THE ASSESSMENT IN SIMILAR CASES AND IN SAME SET OF CIRC UMSTANCES HAS ACCEPTED THE BOOKS RESULTS SHOWN BY THE ASSESSEE WHICH INCLU DED THE ASSESSEE AS WELL, HENCE, HE FOLLOWING THE PRINCIPLE OF CONSISTE NCY LAID 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 CO NSIDERATION NEED TO BE ACCEPTED, AS WELL. HE THEREFORE, SET ASIDE THE ACTI ON OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT AND DIREC TED THE ASSESSING OFFICER TO ACCEPT THE BOOK RESULTS SHOWN BY THE ASSESSEE AN D DELETED THE ADDITIONS SO MADE BY THE ASSESSING OFFICER ON ESTIMATION BASI S. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE REVENUE HAS COME IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E VARIOUS DECISIONS OF THE TRIBUNAL IN THIS RESPECT AND HAS RELIED UPON TH E FOLLOWING RECENT DECISIONS :- 5 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 7. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND FO RCE IN THE CONTENTION OF THE LD. AR. THE ISSUE IS SQUARELY COVERED BY THE ABOVE REFERRED TO DECISIONS OF THE TRIBUNAL WHEREIN WHILING DISMISSIN G THE IDENTICAL 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 FOLLO WED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTE D BY THE PRINCIPAL COMMISSIONER OF INCOME 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 TH E ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. IT WAS ALSO ASSISTED BY THE EXPERTS OF THE NATIONAL INSTIT UTE OF THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDUSTRY REPRESENTATIVES. THE LD. CIT(A) HAS ACCEPT ED THE VARIATION OF 15% IN CONSUMPTION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF T HE COMMITTEE. HE HAS ALSO OBSERVED THAT PURSUANT TO TH E 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 SH OWN BY THE ASSESSES. 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 ALSO AND TO DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PROFITS / 6 UNACCOUNTED INVESTMENT MADE ON ESTIMATION BASIS AS DISCUSSED ABOVE. THE ORDER OF THE CIT(A) IS, THEREF ORE, UPHELD. 8. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL ARE IDENTICAL TO THAT IN THE CASES REFERRED TO ABOVE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND, ACCORDINGLY WE UPHOLD S AME. THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DR. B.R.R. KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28.12.2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR