DCIT, Circle, Parwanoo V. M/s Shree Siddi Vinayak Forging Pvt. Ltd., Nalagarh

ITA 797/CHANDI/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2500 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 30-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENU AMITABH
• Keywords: Unexplained investment
• Section: 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH , ! . .., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ITA NO. 797/CHD/2018 ASSESSMENT YEAR : 2014-15 THE DCIT CIRCLE, SECTOR-2 PARWANOO, HIMACHAL PRADESH M/S SHREE SIDDI VINAYAK FORGING PVT.LTD. VILL: PARGANA PLASSI HIMACHAL PRADESH PAN NO: AAICS8788C APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. A.K. TEWARY SHRI. S.C. GUPTA SHRI. NARESH KUMAR GUPTA #!' REVENUE BY : SMT. RENU AMITABH $ %! & DATE OF HEARING : 22/10/2018 '()*! & DATE OF PRONOUNCEMENT : 31/10/2018 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF THE LD. CIT(A), SHIMLA, H.P. DT. 27/03/2018. 2. IN THE PRESENT APPEAL REVENUE HAS RAISED THE FOL LOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT( A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,38,79,792/- MADE BY THE ASSES SING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTMENT FOR PRODUCTION OF FINISHED G OODS AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE UNDER SECTION 143 (3) OF THE INCOME TAX ACT,1961 . 2. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 16,67,346/- M ADE BY THE A.O. ON ACCOUNT OF UNACCOUNTED PROFITS OUT OF UNACCOUNTED PRODUCTION OF FINISHED PRODUCTS. 3. GROUND 1 & 2 ARE BEING TAKEN UP TOGETHER. 2 4. THE BRIEF FACTS RELATING TO THE ISSUES UNDER CON SIDERATION ARE THAT THE ASSESSEE COMPANY IS A STEEL RE-ROLLING MIL L ENGAGED IN MANUFACTURING OF IRON AND STEEL PRODUCTS VIZ STRUCT URAL STEEL LIKE ANGLES, CHANNELS, FLATS, JOISTS, BEAMS ETC. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESS EE TO FURNISH DETAILS OF DAILY PRODUCTION OF FINISHED GOODS AS WE LL AS THE DETAILS OF THE MANUFACTURING PROCESS INVOLVED. THE ASSESSING O FFICER FURTHER OBSERVED THAT THE AMOUNT OF ELECTRICITY CONSUMED WA S 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 ASSESSI NG OFFICER ANALYZED THE CONSUMPTION DATA OF ELECTRICITY VIS-A VIS THE P RODUCTION OF FINISHED GOODS AND OBSERVED THAT THERE WERE WIDE VA RIATION IN RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODUCED DURING THE YEAR. HE OBSERVED THAT THE ELE CTRICITY CONSUMPTION PMT OF FINISHED GOODS VARIES FROM IN A RANGE AS PER THE CHART SUBMITTED BEFORE THE ASSESSING OFFICER AS WEL L AS THE CIT(A). HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTRIC UNI TS 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 OBSER VED THAT EVEN ON SOME DAYS THOUGH THERE WAS ELECTRICITY CONSUMPTION YET NO 3 PRODUCTION WAS SHOWN. HE FURTHER NOTED THAT OTHERWI SE ON OTHER DAYS, THERE WAS ALSO A BALANCE AND CONSISTENCY IN C ONSUMPTION OF ELECTRIC UNITS VIS-A-VIS PRODUCTION OF FINISHED GOO DS. HE, THEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTIO N 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 BEEN MAINTAINED AS PER ACTUAL PRODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE ASSESSEE EXPLAINED THAT THE CONSU MPTION 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 COMPANY WAS INVOLVED IN UNACCOUNTED PRODUC TION 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 ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY IN VOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AND PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. HE THEREAFTER ESTIMAT ED THE INCOME OF THE ASSESSEE ON THE BASIS OF ELECTRIC UNITS CONSUME D FOR 12 MONTHS AS PER CHART REPRODUCED IN THE ASSESSMENT ORDER. HE CO MPARED THE SAME WITH THAT SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE UNACCOUNTED PRODUCTION FOR EACH MONTH . THEREAFTER, ON THE BASIS OF AVERAGE SALES RATE, THE VALUE OF TO TAL UNACCOUNTED PRODUCTION WAS ESTIMATED IN MONETARY TERMS AND THEN ADOPTING THE 4 GROSS PROFIT RATE SHOWN BY THE ASSESSEE, THE UNACCO UNTED PROFIT OUT OF THE UNACCOUNTED PRODUCTION WAS WORKED OUT. SECON DLY, THE PEAK UNACCOUNTED PRODUCTION FOR THE RELEVANT MONTH WAS D ETERMINED AND BY MULTIPLYING THE AVERAGE SALE RATE OF FINISHE D GOODS, THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THE ASSESSI NG OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INVESTMEN T OF THE ASSESSEE IN THE UNACCOUNTED PRODUCTION AT RS.4,38, 79,792/- AND RS. 16,67,346/- BEING UNACCOUNTED PROFIT OUT OF UNACCOU NTED PRODUCTION AND ADDED BACK THE SAME TO THE TOTAL INC OME OF THE ASSESSEE. 5. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). TH E LD. CIT(A) DELETED THE ADDITION BASED ON THE DEVELOPMENTS TOOK PLACE SUBSEQUENT TO THE PASSING OF THE ABOVE STATED IMPUG NED 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 EXPE RTS FROM THE NISST (NATIONAL INSTITUTE OF THE SECONDARY STEEL TE CHNOLOGY) AND ALSO THE INDUSTRY REPRESENTATIVES. ON THE BASIS OF THE R EPORT OF THE COMMITTEE, IT WAS DECIDED THAT IF THE VARIATION IN THE CONSUMPTION OF THE ELECTRICITY IS WITHIN THE RANGE OF 15% OF TH E YEARLY AVERAGE CONSUMPTION OF POWER, THE BOOK RESULTS SHOULD BE AC CEPTED. 6. LD. COUNSEL FOR THE ASSESSEE, RELYING UPON THE R EPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA ARGUED THAT HE WAS COVERED ON THE ISSUE OF PRODUCTION AS 5 DECIDED BY THE COMMITTEE. THE ASSESSEE WAS ENTITLED TO BENEFIT OF 15% VARIATION IN CONSUMPTION OF ELECTRICITY PER MET RIC TON OF FINISHED GOODS PRODUCED FROM THE AVERAGE WORKED OUT ON YEARL Y BASIS AND THE VARIATION UP TO 15% WOULD NOT WARRANT ANY ADVER SE COGNIZANCE. 7. THIS TRIBUNAL VIDE ITS COMMON ORDER DATED 14.2.2 017, PASSED IN THE CASE OF M/S MODI OIL & GENERAL MILL, MANDI GOB INDGRH AND OTHERS IN ITA NO. 149/CHD/2016 AND IN ITA NO. 662/C HD/2016IN THE CASE OF M/S.UNIPEARL ALLOYS , OBSERVING THAT CONSEQUENT TO THE REPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMMI SSIONER OF INCOME TAX, PATIALA CERTAIN INTERNAL GUIDELINES REG ARDING ACCEPTABILITY OF VARIATION UPTO 15% HAVE BEEN ISSUE D AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE I N SUBSEQUENT YEARS BY THE ASSESSING OFFICER, HAS REMANDED THE MA TTER TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE IS SUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GU IDELINES ISSUED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA. 8. IN THE INSTANT CASE, THE LD. CIT(A) AFTER EXAMIN ING IN DETAIL THE TABLE AFTER CONSIDERING VARIATION OF 7.24% FOR DIFF ERENT MONTHS, EXAMINED THE FINISHED GOODS PRODUCED, CALCULATING T HE DIFFERENCE IN PRODUCTION IN MT AND ALSO THE DIFFERENCE IN PROD UCTION IN PERCENTAGE CATEGORICALLY HELD THAT THE ASSESSEE FAL LS WITHIN THE ACCEPTED RANGE OF VARIATION AND THEREFORE NO INTERF ERENCE WITH THE BOOK RESULT IS WARRANTED. IT WAS ALSO HELD BY THE L D. CIT(A) THAT SINCE THE GROUND RELATING TO UNACCOUNTED PRODUCTION STAND S ALLOWED THE CONSEQUENTIAL ADDITION MADE UNDER UNEXPLAINED INVES TMENT WOULD ALSO BE DEEMED TO HAVE BEEN ALLOWED. 6 9. AFTER HEARING BOTH THE PARTIES AND GOING THROUGH THE ISSUES INVOLVED IN THE CASE, CONSIDERING THE FACTS AND CI RCUMSTANCES OF THE INSTANT CASE AND IN VIEW OF OUR SIMILAR FINDING S GIVEN BY THIS TRIBUNAL THE CASES MENTIONED ABOVE AT PARA 7, WE HE REBY DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . .., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE: 31/10/2018 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE