Income Tax Officer, Sirhind V. M/s Regal Alloys Pvt. Ltd., Mandi Gobindgarh

ITA 913/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7023 (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: Unexplained investment; Income from undisclosed sources
• 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. 913/CHD/2017 ASSESSMENT YEAR : 2012-13 THE ITO, VS M/S REGAL ALLOYS PVT. LTD, WARD 1, MANDI GOBINDGARH MANDI GOBINDGARH HQ SIRHIND PAN: AADCR0287Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SH. ASHWANI KUMAR 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 29.03.2017 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 INDUCTION FURNACE I.E. MANUFACTURING STEEL INGOTS, IRON & STEEL GOODS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER ASKED THE ASSESSEE TO FURNISH DETAILS OF DAILY PRODUCTION OF FINISHED GOODS AS 2 WELL AS THE DETAILS OF THE MANUFACTURING PROCESS IN VOLVED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE AMOUNT OF ELECTRICITY CONSUMED WAS DIRECTLY RELATED TO THE PRODUCTION OF FINISHED GOODS. IN ORDER TO CO-RELATE THE CONSUMPTION OF ELECTRICITY V IS--VIS PRODUCTION SHOWN, THE ASSESSING OFFICER GATHERED INFORMATION R EGARDING THE CONSUMPTION OF ELECTRICITY FROM THE ELECTRICITY BOA RD. THE ASSESSING OFFICER ANALYZED THE CONSUMPTION DATA OF ELECTRICIT Y VIS-A VIS THE PRODUCTION OF FINISHED GOODS AND OBSERVED THAT THER E WERE WIDE VARIATION IN RATIO OF ELECTRICITY UNITS CONSUMED TO PER METRIC TONS OF FINISHED GOODS PRODUCED DURING THE YEAR. HE FURTHER OBSERVED THAT ON SOME DAYS, ELECTRIC UNITS CONSUMED WERE VERY LOW WH EREAS FINISHED GOODS PRODUCED WERE VERY HIGH GIVING A VERY LOW VAL UE OF ELECTRIC UNITS CONSUMED TO PER TON OF FINISHED GOODS, WHEREA S ON SOME OTHER DAYS, ELECTRIC UNITS CONSUMED WERE VERY HIGH WHEREA S THE FINISHED GOODS PRODUCED WERE VERY LESS GIVING A VERY HIGH VA LUE OF ELECTRIC UNITS CONSUMED PER METRIC UNIT OF FINISHED GOODS. H E FURTHER OBSERVED THAT EVEN ON SOME DAYS THOUGH THERE WAS EL ECTRICITY CONSUMPTION YET NO PRODUCTION WAS SHOWN. HE FURTHER NOTED THAT OTHERWISE ON OTHER DAYS, THERE WAS ALSO A BALANCE A ND CONSISTENCY IN CONSUMPTION OF ELECTRIC UNITS VIS-A-VIS PRODUCTION OF FINISHED GOODS. HE, THEREFORE, OBSERVED THAT IT INDICATED THAT THE DAILY PRODUCTION RECORDED BY THE ASSESSEE OF THE FINISHED GOODS WAS NOT CORRECT AND, HENCE, NOT RELIABLE. HE OBSERVED THAT THE DATA RELA TING TO THE DAILY PRODUCTION HAD NOT BEEN MAINTAINED AS PER ACTUAL PR ODUCTION. WHEN CONFRONTED IN THIS RESPECT, THE ASSESSEE EXPLAINED THAT THE CONSUMPTION OF ELECTRICITY WAS DEPENDENT ON VARIOUS FACTORS AS 3 DETAILED IN HIS REPLY WHICH HAS BEEN REPRODUCED BY THE ASSESSING 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 BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AN D PROCEEDED TO FRAME THE ASSESSMENT IN THE MANNER AS PROVIDED U/S 144 OF THE ACT. THE ASSESSING OFFICER COMPUTED THE QUANTUM OF ACTUA L FINISHED GOODS PRODUCED AND THERAFTER ASCERTAINED THE UNACCOUNTED PRODUCTION FOR EACH MONTH AFTER DEDUCTING THE FINISHED GOODS PRODU CED DURING THE MONTHS SHOWN IN THE BOOK OF ACCOUNT. THEREAFTER ON THE BASIS OF AVERAGE PURCHASE RATE TOTAL UNACCOUNTED PRODUCTION WAS ESTIMATED IN AND THEN ADOPTING THE GROSS PROFIT RATE SHOWN BY TH E ASSESSEE, THE UNACCOUNTED PROFIT OUT OF THE UNACCOUNTED PRODUCTIO N WAS WORKED OUT ON THE BASIS OF AVERAGE PURCHASE RATE. SECONDLY, TH E PEAK UNACCOUNTED PRODUCTION FOR THE RELEVANT MONTH WAS D ETERMINED BY MULTIPLYING WITH THE AVERAGE PURCHASE RATE OF FINIS HED GOODS, THE UNACCOUNTED INVESTMENT WAS WORKED OUT. THE ASSESSIN G OFFICER IN THIS WAY WORKED OUT THE TOTAL UNACCOUNTED INCOME OF THE ASSESSEE OUT OF THE UNACCOUNTED PRODUCTION AT RS. 1,23,29,000/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE FIRM. THE ASSES SING OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. BEING AGGRIEVED FROM THE ABOVE ORDER OF THE ASSE SSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4 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 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 5 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. AT THE OUTSET, LD. COUNSEL OF THE ASSESSEE HAS B ROUGHT TO OUR KNOWLEDGE THAT ON IDENTICAL ISSUES WHEREIN THE ADDI TIONS MADE BY THE ASSESSING OFFICER ON ESTIMATION BASIS AS DISCUSSED ABOVE WERE UPHELD BY THE CONCERNED CIT(A), THE ASSESSEES PREFERRED AP PEALS BEFORE THIS TRIBUNAL AND THIS TRIBUNAL VIDE ITS COMMON ORDER DA TED 14.2.2017, PASSED 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 CONSEQUENT TO THE R EPORT OF THE COMMITTEE CONSTITUTED BY THE PRINCIPAL, COMMISSIONE R OF INCOME TAX, PATIALA SOME INTERNAL GUIDELINES REGARDING ACC EPTABILITY OF VARIATION UPTO 15% HAVE BEEN ISSUED AND FURTHER THA T NO ADDITIONS 6 HAVE BEEN MADE ON SIMILAR ISSUE IN SUBSEQUENT YEARS BY THE ASSESSING OFFICER, HAS REMANDED THE MATTER TO THE A SSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCO RDANCE WITH LAW IN THE LIGHT OF THE INTERNAL GUIDELINES ISSUED BY THE PRINCIPAL, COMMISSIONER OF INCOME TAX, PATIALA. 7. THE LD. COUNSEL HAS STATED THAT THIS MATTER NEE D NOT TO BE RESTORED IN THE PRESENT APPEALS AS THE LD. CIT(A) W HILE DECIDING THE ABOVE APPEALS IN FAVOUR OF THE ASSESSEE HAS ALREADY FOLLOWED THE INTERNAL GUIDELINES OF THE COMMITTEE CONSTITUTED B Y THE PRINCIPAL COMMISSIONER OF INCOME TAX, PATIALA. THAT THE COMMI TTEE SO CONSTITUTED WAS A BROAD BASED MULTI MEMBER BODY HAV ING ADDITIONAL COMMISSIONER OF INCOME TAX, MANDI GOBINDGARH AS ITS HEAD AND ALL THE ASSESSING OFFICERS OF THE RANGE AS ITS MEMBERS. IT WAS ALSO ASSISTED BY THE EXPERTS OF THE NATIONAL INSTITUTE O F THE SECONDARY STEEL TECHNOLOGY (NISST) AND THE INDUSTRY REPRESENT ATIVES. THE LD. CIT(A) HAS ACCEPTED THE VARIATION OF 15% IN CONSUMP TION OF ELECTRICITY PER METRIC TON OF FINISHED GOODS AS PER THE REPORT OF THE COMMITTEE. HE HAS ALSO OBSERVED THAT PURSUANT TO TH E REPORT OF COMMITTEE, THE ASSESSING OFFICERS HAVE ALSO FOLLOW ED THIS NORM WHILE MAKING ASSESSMENT IN SIMILAR TYPE OF CASES AN D HAVE ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSES. CONSIDERIN G THE ABOVE 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 7 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 HERE BY 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