Income Tax Officer, Sirhind V. Sh. Harpreet Singh, Mandi Gobindgarh

ITA 912/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7012 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Rejection of books of accounts; Unexplained investment
• 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. 912/CHD/2017 ASSESSMENT YEAR : 2012-13 THE ITO, VS SH. HARPREET SINGH, WARD 1, PROP M/S BANSIWALA STEEL, MANDI GOBINDGARH ROLLING MILLS, HQ SHIRHIND MANDI GOBINDGARH. PAN: AEPS7523Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : NONE DATE OF HEARING : 25.07.2017 DATE OF PRONOUNCEMENT : 01.08.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 30.03.2017 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)], PATI ALA. 2. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF IRON & STEEL GOODS. DURING THE ASSESSMENT PROCEEDINGS, T HE 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 2 INVOLVED. THE ASSESSING OFFICER FURTHER OBSERVED TH AT THE AMOUNT OF ELECTRICITY CONSUMED WAS DIRECTLY RELATED TO THE PR ODUCTION OF 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 3 OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFFI CER, HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY OF THE ASSESSEE. HE ULTIMATELY HELD 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 IN MO NETARY TERMS AND THEN ADOPTING THE GROSS PROFIT RATE SHOWN BY THE AS SESSEE, THE UNACCOUNTED PROFIT OUT OF THE UNACCOUNTED PRODUCTIO N WAS WORKED OUT. SECONDLY, THE PEAK UNACCOUNTED PRODUCTION FOR THE RELEVANT MONTH WAS DETERMINED AND BY MULTIPLYING THE AVERAGE SALE RATE OF FINISHED GOODS, THE UNACCOUNTED INVESTMENT WAS WORK ED OUT. THE ASSESSING OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INVESTMENT OF THE ASSESSEE IN THE UNACCOUNTED PROD UCTION AT RS. 4 82,54,288/- AND THE ESTIMATED PROFIT ON ALLEGED SAL E OF ALLEGED UNACCOUNTED PRODUCTION AT RS. 8,22,764/- AND THEREB Y MADE AN ADDITION OF RS. 90,77,052/- 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) 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 5 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 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. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER, THE REVENUE HAS COME IN APPEAL BEFORE US. 6. SHRI MANJIT SINGH, LD. DR APPEARED ON BEHALF OF THE REVENUE WHEREAS NONE APPEARED ON BEHALF OF THE ASSESSEE. A T THE OUTSET, THE LD. DR HAS BROUGHT TO OUR KNOWLEDGE THAT ON IDENTIC AL ISSUES, WHEREIN THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS AS DISCUSSED ABOVE WERE UPHELD BY THE CONCERN ED CIT(A), THE ASSESSEES PREFERRED APPEALS BEFORE THIS TRIBUNAL AN D THIS TRIBUNAL 6 VIDE ITS COMMON ORDER DATED 14.2.2017, PASSED IN A BUNCH OF ABOUT 85 APPEALS IN THE CASE OF M/S MODI OIL & GENERAL MI LL, MANDI GOBINDGRH AND OTHERS IN ITA NO. 149/CHD/2016 AND OT HERS WHILE OBSERVING THAT CONSEQUENT TO THE REPORT OF THE COMM ITTEE CONSTITUTED BY THE PRINCIPAL, COMMISSIONER OF INCOME TAX, PATIA LA SOME INTERNAL GUIDELINES REGARDING ACCEPTABILITY OF VARIATION UPT O 15% HAVE BEEN ISSUED AND FURTHER THAT NO ADDITIONS HAVE BEEN MADE ON SIMILAR ISSUE IN SUBSEQUENT YEARS BY THE ASSESSING OFFICER, HAS R EMANDED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF THE I NTERNAL GUIDELINES ISSUED BY THE PRINCIPAL, COMMISSIONER OF INCOME TA X, PATIALA. 7. FURTHER, IN OUR VIEW THIS MATTER NEED NOT TO BE RESTORED IN THE PRESENT APPEALS AS THE LD. CIT(A) WHILE DECIDING TH E ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL COMM ISSIONER OF INCOME TAX, PATIALA. THE COMMITTEE SO CONSTITUTED W AS A BROAD BASED MULTI MEMBER BODY HAVING ADDITIONAL COMMISSIO NER OF INCOME TAX, MANDI GOBINDGARH AS ITS HEAD AND ALL TH E ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. IT WAS ALSO A SSISTED BY THE EXPERTS OF THE NATIONAL INSTITUTE OF THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDUSTRY REPRESENTATIVES. THE LD. C IT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMPTION OF ELE CTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF T HE COMMITTEE. HE HAS ALSO OBSERVED THAT PURSUANT TO THE REPORT OF CO MMITTEE, THE ASSESSING OFFICERS HAVE ALSO FOLLOWED THIS NORM WHI LE MAKING ASSESSMENT IN SIMILAR TYPE OF CASES AND HAVE ACCEPT ED THE BOOK 7 RESULTS SHOWN BY THE ASSESSES. CONSIDERING THE ABO VE 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 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. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS HER EBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.08.2017. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 01.08.2017 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR