DCIT, Sirhind V. M/s Saggar Steels Pvt. Ltd., Mandi Gobindgarh

ITA 841/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5054 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHAR
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.841 & 842/CHD/2017 (ASSESSMENT YEAR : 2012-13 & 2013-14) THE A.C.I.T., VS. M/S SAGGAR STEELS PVT. LTD., CIRCLE MANDI GOBINDGARH, G.T. RAOD, MANDI GOBINDGARH. HQ. SIRHIND. PAN: AAICS9071N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.K. DHAR, CIT DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 13.07.2017 DATE OF PRONOUNCEMENT : 26.07.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF LD.CIT(APPEALS), PATIALA BOTH DATED 22.3.2017 RELATING TO ASSESSMENT YEARS 2012-1 3 AND 2013-14 RESPECTIVELY. 2. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THE ISSUE RAISED IN BOTH THE APPEALS WAS IDENT ICAL AND, THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. FOR THE S AKE OF CONVENIENCE WE SHALL BE DEALING WITH THE FACTS IN T HE CASE OF ITA NO.841/CHD/2017. ITA NO.841/CHD/2017 3. THE REVENUE HAS RAISED THE SOLITARY GROUND OF APPEAL WHICH READS AS UNDER: 2 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE LD.CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTM ENT AND UNACCOUNTED PROFIT OUT OF UNACCOUNTED PRODUCTIO N EVEN WHEN THE VARIATION OF CONSUMPTION OF ELECTRICI TY WAS MORE THAN 15%. 4. BRIEF FACTS LEADING TO THE PRESENT APPEAL ARE T HAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL INGOTS AND TRADING OF IRON A ND STEEL. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER FOUND THAT THE PRODUCTION OF FINISHED GOODS SHOWN B Y THE ASSESSEE WAS NOT IN CONSONANCE WITH THE CONSUMPTION OF ELECTRICITY WITH WHICH IT WAS DIRECTLY RELATED AND THE ASSESSING OFFICER FOUND THAT IT SHOWED GREAT DEGRE E OF VARIANCE. THE ASSESSING OFFICER GATHERED DATA RELA TING TO CONSUMPTION OF ELECTRICITY FROM THE ELECTRICITY BOA RD. FURTHER THE ASSESSING OFFICER COLLECTED DATA RELATI NG TO QUANTITY OF FINISHED GOODS PRODUCTION IN A GIVEN DA Y IN MT AND ON COMPARING THE SAME WITH THE ELECTRICITY CONS UMED ON THAT DAY HE WORKED OUT THE UNITS OF ELECTRICITY CONSUMED PER MT. FROM THE SAME, THE ASSESSING OFFICER OBSER VED THAT THE CONSUMPTION OF ELECTRICITY PER MT OF FINISHED GOODS VARIED FROM 87.36 UNITS TO 1752.99 UNITS, WHILE THE AVERAGE FOR THE ENTIRE YEAR WAS 946.94 UNITS. ON CONFRONTI NG THE SAME TO THE ASSESSEE IT WAS SUBMITTED THAT THE CONS UMPTION OF ELECTRICITY DEPENDED ON VARIOUS FACTORS I.E. QUA LITY OF MATERIAL, HOLDING PERIOD OF MOLTEN METAL FOR REMOVI NG THE SLAG, MISMATCH IN RECORDING CYCLE, METAL LEAKAGE, L ABOUR DEFICIENCY, BREAK DOWN OF MACHINERY, ETC. THE ASSE SSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND 3 THEREAFTER WENT ON TO COMPUTE AND CALCULATE THE UNACCOUNTED PRODUCTION DONE BY THE ASSESSEE BY ADOP TING THE ELECTRICITY CONSUMED PER MT ON THE BASIS OF MIN IMUM AVERAGE VALUE FOR A PERIOD OF 10 DAYS. THE ASSESSI NG OFFICER GAVE SOME RELIEF FOR ELECTRICITY UNITS NOT RELATED TO PRODUCTION, DUE TO CLOSED DAYS AND THEREAFTER COMPU TED THE ACTUAL ELECTRICITY CONSUMED FOR 12 MONTHS ON THE B ASIS OF 765.49 UNITS PER MT OF PRODUCTION. THE ASSESSING O FFICER THEREAFTER COMPUTED ACTUAL FINISHED GOODS PRODUCED AND ASCERTAINED THE UNACCOUNTED PRODUCTION OF EACH MONT H AFTER DEDUCTING THE FINISHED GOODS PRODUCED AS SHOW N IN THE BOOKS OF ACCOUNT. THEREAFTER ON THE BASIS OF AVERA GE PURCHASE RATE, TOTAL UNACCOUNTED PRODUCTION WAS EST IMATED IN MONETARY TERMS AND THEN ADOPTING THE GROSS PROFI T RATE SHOWN BY THE ASSESSEE THE UNACCOUNTED PROFIT OUT OF THE UNACCOUNTED PRODUCTION WAS WORKED OUT ON THE BASIS OF THE AVERAGE SALE RATE. SECONDLY, THE PEAK UNACCOUNTED PRODUCTION FOR THE MONTH WAS DETERMINED AND BY MULTIPLYING WITH THE AVERAGE PURCHASE RATE OF FINIS HED GOODS, THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THUS THE TOTAL ADDITION OF RS.2,39,56,982/- WAS MADE TO THE INCOME OF THE ASSESSEE. 5. THE MATTER WAS CARRIED IN APPEAL TO THE LD.CIT(APPEALS) WHERE THE ASSESSEE CONTENDED THAT T HE VARIATION IN THE ELECTRICITY CONSUMPTION WAS WITHIN 15% LIMIT OF ANNUAL AVERAGE ELECTRICITY CONSUMED EXCEPT FOR THE BLOCKS OF 21.1.2011 TO 30.11.2011, 22.12.2011 TO 4 31.12.2011 AND 21.1.2012 TO 31.1.12012. THE LD. CO UNSEL FOR ASSESSEE CONTENDED THAT THE ELECTRICITY CONSUME D IN THE SAID BLOCK WAS LOWER THAN THE LOWEST LIMIT OF 15% W HICH DENOTED EFFICIENT UTILIZATION OF ELECTRICITY CONSUM ED. HE, THEREFORE, CONTENDED THAT NO ADVERSE INFERENCE BE D RAWN FROM THE SAME. THE CONTENTION OF THE ASSESSEE WERE CONFRONTED TO THE ASSESSING OFFICER WHO VERIFIED TH E SAME FROM THE RECORD AND STATED THAT YEARLY AVERAGE CAME TO 946.94 UNITS WHEREAS THE HIGHEST AVERAGE PER CYCLE OF 10 DAYS WAS 1017.51 UNITS AND LOWEST 765.49 UNITS. TH E ASSESSING OFFICER STATED IN THE REPORT THAT THE VAR IATION WAS THUS NOT LESS THAN 15% OF THE YEARLY AVERAGE. 6. IN THE REJOINDER THE ASSESSEE CONTENDED THAT TH E ASSESSING OFFICER HAD VERIFIED THE FIGURES OF CONSU MPTION OF ELECTRICITY GIVEN BY THE ASSESSEE AND SINCE THE VAR IATION EXCEEDING 15% OF THE CONSUMPTION WAS WITH RESPECT T O THE LOWEST AVERAGE, NO ADVERSE INFERENCE COULD BE DRAWN FROM THE SAME. THE LD.CIT(APPEALS) AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE HELD THAT THERE WAS MER IT IN THE CONTENTION RAISED. THE LD.CIT(APPEALS) POINTED OUT THAT A DETAILED STUDY HAD BEEN CONDUCTED BY THE COMMITTE E CONSTITUTED BY THE PRINCIPAL CIT, PATIALA WITH A VI EW TO EXAMINE THE VARIATION IN CONSUMPTION OF ELECTRICITY VIS--VIS PRODUCTION OF FINISHED GOODS IN THE ROLLING MILL AN D INDUCTION FURNACES OF THE AREA. THE COMMITTEE, A B ROAD BASED MULTIMEMBER BODY, HAD THE ADDL. CIT, RANGE MA NDI GOBINDGARH AS ITS HEAD AND ALL THE A.OS OF THE RANG E AS ITS 5 MEMBERS. IT WAS ASSISTED BY THE EXPERTS FROM THE N ATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY & INDUS TRY REPRESENTATIVES. THE LD.CIT(APPEALS) STATED THAT H E HAD ACCESSED ITS REPORT FROM JCIT, RANGE, MANDI GOBINDG ARGH AND POINTED OUT THAT THE SAID COMMITTEE HAD DECIDED TO GIVE BENEFIT OF 15% VARIATION IN THE NUMBER OF CONSUMPTI ON OF ELECTRICITY PER MT OF FINISHED GOODS PRODUCED FROM THE AVERAGE WORKED OUT ON YEARLY BASIS. THE LD.CIT(APP EALS) HELD, THEREFORE, THAT WHERE THE VARIATIONS WERE WIT HIN 15% RANGE THE BOOKS OF ACCOUNT COULD NOT BE REJECTED. HE ALSO OBSERVED THAT PURSUANT TO THE REPORT OF THE COMMITT EE, A.OS HAD BEEN FOLLOWING THIS NORM WHILE MAKING ASSESSMEN T IN SIMILAR CASES AND IN SIMILAR SET OF CIRCUMSTANCES. THEREFORE, PLACING RELIANCE ON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RIETA BISCUITS CO.(P) LTD. (2009) 309 ITR 154 HELD THAT B OOK RESULTS OF THE ASSESSEE WERE TO BE ACCEPTED. THE T WIN ADDITIONS MADE BY THE ASSESSING OFFICER BY REJECTIN G BOOKS OF ACCOUNT OF THE ASSESSEE WERE, THEREFORE, DELETED BY THE LD.CIT(APPEALS). 7. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ISSUE IN THE PRESENT CASE HAD ALREADY BEEN DECIDED BY THE I.T.A. T. IN A NUMBER OF CASES. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE DECISION OF HE ITAT CHANDIGARH BEN CH IN THE CASE OF ITO, WARD-1 VS. M/S DHIMAN STEEL ROLLIN G MILLS 6 REPORTED IN ITA NO.392/CHD/2017 DATED 28.4.2017. T HE LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS COVERED BY TH E SAID DECISION OF THE I.T.A.T. 8. WE HAVE HEARD BOTH THE PARTIES. WE FIND NO MER IT IN THE PRESENT APPEAL OF THE REVENUE. THE BOOKS OF ACCOUNT IN THE PRESENT CASE HAD BEEN REJECTED ON ACCOUNT O F THE DISPARATE CONSUMPTION OF ELECTRICITY VIS--VIS PROD UCTION OF FINISHED GOODS. ADMITTEDLY, A COMMITTEE HAD BEEN F ORMED TO EXAMINE THIS ISSUE WHICH WAS CONSTITUTED BY THE PRINCIPAL CIT, PATIALA WHICH AFTER SEEKING ASSISTAN CE FROM TECHNICAL PERSONNEL OF NATIONAL INSTITUTE OF SECOND ARY TECHNOLOGY THE INDUSTRY REPRESENTATIVE HAD RECOMMEN DED THAT VARIATIONS TO THE EXTENT OF 15% OF THE AVERAG E YEARLY CONSUMPTION WAS TO BE ACCEPTED. IT WAS BASED ON TH IS RECOMMENDATION OF THE EXPERT COMMITTEE AND ON FINDI NG THAT THE VARIATION IN THE PRESENT CASE DID NOT EXCE EDED 15% THE LD.CIT(APPEALS) ACCEPTED THE BOOKS OF ACCOUNT O F THE ASSESSEE. THE GROUND OF APPEAL RAISED BY THE REVEN UE STATES THAT THE VARIATION IN THE CONSUMPTION OF ELE CTRICITY WAS MORE THAN 15%. THIS, WE FIND, IS FACTUALLY IN CORRECT VIS--VIS THE HIGHEST CONSUMPTION OF ELECTRICITY SH OWN BY THE ASSESSEE. ADMITTEDLY THE VARIATION IN THAT CASE WAS WITHIN 15% RANGE AS VERIFIED BY THE ASSESSING OFFI CER ALSO. THE LD. DR ALSO HAS NOT DISPUTED THE SAID FACTS. APPARENTLY VARIATION EXCEEDS THE 15% LIMIT ONLY IN THE CASE OF LOWEST CONSUMPTION OF ELECTRICITY SHOWN BY THE A SSESSEE WHICH AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR ASSESSEE 7 AND ALSO HELD BY THE L.CIT(A), HAS TO BE VIEWED POS ITIVELY REFLECTING EFFICIENT UTILIZATION OF ELECTRICITY CON SUMED AND NO ADVERSE VIEW CAN BE TAKEN FROM THE SAME. THE LD.CIT(APPEALS), THEREFORE, WE HOLD HAS RIGHTLY ACC EPTED THE BOOK RESULTS OF THE ASSESSEE. THE GROUND OF APPEAL RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.842/CHD/2017 9. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS A ND CIRCUMSTANCES OF THIS APPEAL ARE SIMILAR TO THE FAC TS AND CIRCUMSTANCES IN ITA NO.841/CHD/2017 AND THE FINDIN GS GIVEN IN ITA NO.842/CHD/2017 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL ALSO. THIS APPEAL OF THE R EVENUE IS ALSO DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH JULY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH