Assistant Commissioner of Income-tax, V. Bhagyalaxmi Steel Alloys Pvt. Ltd., Jalna

ITA 991/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7335 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-10-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Rectification of order; Cost of acquisition
• Section: 12; 10; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.990 & 991/PUN/2015 / ASSESSMENT YEAR : 2011-12 ACIT, JALNA CIRCLE, JALNA . /APPELLANT VS. BHAGYALAXMI STEEL ALLOYS PVT. LTD., G-8, PHASE-II, ADDITIONAL MIDC, JALNA 431 203 PAN : AACCB4708R . / RESPONDENT / APPELLANT BY : SHRI AJAY MODI / RESPONDENT BY : SHRI J.P. BAIRAGRA / DATE OF HEARING : 10.10.2017 / DATE OF PRONOUNCEMENT: 18.10.2017 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 2 APPEALS UNDER CONSIDERATION FILED BY TH E REVENUE INVOLVING COMMON A.Y. 2011-12 IN THE CASE OF BHAGYALAXMI STEE L ALLOYS PVT. LTD. FURTHER, ITA NO.990/PUN/2015 HAS ORIGIN IN THE ORDE R PASSED BY THE AO U/S.154 OF THE ACT. OTHERWISE, ITA NO.991/PUN/2015 IS FILED IN CONNECTION WITH THE REGULAR ASSESSMENT MADE U/S.143(3) OF THE ACT. ITA NO.990/PUN/2015 (BY REVENUE) : 2. TO START WITH, WE SHALL TAKE UP ITA NO.990/PUN/2 015 WHICH IS FILED IN CONNECTION WITH THE ORDER OF AO U/S.154 OF THE ACT. GROUNDS RAISED BY THE REVENUE READ AS UNDER : ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 2 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A), AURANGABAD HAS ERRED IN DIRECTING TO TAX INCOME FRO M STCG @ 20% INSTEAD OF REGULAR TAX RATE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A), AURANGABAD HAS ERRED IN RELYING UPON DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF M/S. ACE BUILDERS LTD. WHICH IS ON D IFFERENT FACTS. 3. THE BACKGROUND GENERAL FACTS OF THE CASE INCLUDE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFACTURING OF MILD STEEL, BILLETS FROM MILD STEEL, SCRAP/SPONGE IRON IN A FURNACE OF 25MT CAPACITY. A SSESSEE FILED THE RETURN ELECTRONICALLY ON 29-09-2011 DECLARING TOTAL INCOME OF RS.1,43,83,520/- INCLUDING SHORT TERM/LONG TERM CAPITAL GAIN AT RS.1 ,96,79,501/-. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO A SSESSED THE INCOME OF THE ASSESSEE ON ACCOUNT OF SHORT TERM/LONG TERM CAPITAL GAINS AT RS.8,72,07,945/- AND TAX 30% ON SUCH GAINS. CIT(A) ALLOWED THE APPE AL OF THE ASSESSEE DIRECTING THE AO TO TAX 20% ON SUCH GAINS. AGGRIEV ED WITH SUCH ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 4. THE FACTS RELATING TO THE ISSUE UNDER CONSIDERAT ION INCLUDE THAT THE ASSESSEE SOLD THE DEPRECIABLE ASSETS WHICH GAVE RIS E TO THE CAPITAL GAINS WITHIN THE MEANING OF SECTION 50 OF THE I.T. ACT. AS PER THE PROVISIONS, THE SAID GAINS ARE REQUIRED TO BE DEEMED AS SHORT TERM CAPITAL GAINS. THIS IS NOT THE CASE OF RE-INVESTMENT OF SUCH GAINS IN ANY SPEC IFIED ASSETS FOR CLAIMING THE EXEMPTION/DEDUCTION. DURING THE ASSESSMENT PROCEED INGS, THE AO ERRONEOUSLY APPLIED 30% RATE OF TAX ON THE LONG TER M CAPITAL GAINS AND 20% RATE OF TAX ON THE SHORT TERM CAPITAL GAINS. THERE FORE, THE AO PASSED THE RECTIFICATION ORDER DT. 27-06-2014 U/S.154 OF THE A CT BY APPLYING THE TAX RATE OF 30% IN RESPECT OF THE SHORT TERM CAPITAL GAINS A ND 20% IN RESPECT OF THE LONG TERM CAPITAL GAINS. THE REASONS GIVEN BY THE AO READ AS UNDER : IN THIS CASE, ASSESSMENT U/S.143(3)(II) OF THE INC OME TAX ACT, 1961, HAS BEEN COMPLETED BY THE JOINT COMMISSIONER OF INCOME TAX, RANGE-1, AURANGABAD ON 14-03-2013 AT A TOTAL ASSESSED INCOME AT RS.8,72,07,945/- ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 3 INCLUDING LTCG OF RS.1,16,65,065/- AND STCG OF RS.4 ,36,31,242/-. DURING THE VERIFICATION OF THE RECORD IT IS FOUND THAT THERE I S A MISTAKE IN CALCULATION OF TAX IN LTCG AND STCG. TAX ON LTCG OF RS.1,16,65,065/- HAS BEEN WRONGLY CALCULATED @30% AND TAX ON STCG OF RS.4,36,31,242/- HAS BEEN WRONGLY CALCULATED @20%, WHICH IS APPARENT FROM RECORDS WHI CH IS RECTIFIED U/S.153. CONSIDERING THE ABOVE FACTS COMPUTATION OF INCOME I S CALCULATED AS UNDER. AS PER ONLINE SCREENSHOT OF ORDER U/S.154 DATED 27-06- 2014. ORDER PASSED U/S.154. ISSUE DEMAND/REFUND ACCORDIN GLY. AGGRIEVED WITH THE SAME, THE ASSESSEE FILED THE APP EAL BEFORE THE CIT(A). 5. THERE IS NO DISPUTE ABOUT THE TAXATION OF LONG T ERM CAPITAL GAINS. THE DISPUTE IS ONLY WITH REGARD TO THE APPLICABLE RATE OF TAX TO THIS DEEMED SHORT TERM CAPITAL GAINS LINKED TO DEPRECIABLE LONG TERM CAPITAL ASSETS. AO IS OF THE VIEW THAT THE RATE OF 30% IS APPLICABLE TO SUCH GAI NS. SECTION 50 OF THE ACT DEEMS THE GAINS COMPUTED ON SALE OF DEPRECIABLE ASS ETS AS SHORT TERM CAPITAL GAINS AND THEREFORE, THE AO APPLIED 30% RATE OF TAX TO SUCH GAINS IGNORING THE FACT THAT THE ASSESSEE HELD SUCH ASSETS FOR A PERIO D LONGER THAN 36 MONTHS. ASSESSEE IS OF THE VIEW THAT SUCH ASSETS ARE LONG T ERM CAPITAL ASSETS IN VIEW OF PERIOD OF HOLDING AND THEREFORE, RATE OF 20% APPLIE S AND NO RECTIFICATION OF ORDER IS CALLED FOR. 6. BEFORE THE CIT(A) ASSESSEE RELIED ON THE JUDGMEN T OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ACE BUILDERS PVT. LTD. 28 ITR 2010 (BOM.) AND SUBMITTED THAT THE SAID JUDGMENT IS RELEVANT FOR TH E LEGAL PROPOSITION THAT, INCASE, FOR ASSETS HELD BY THE ASSESSEE FOR THE PER IOD EXCEEDING 36 MONTHS, THE APPLICABLE RATE IN RESPECT OF THE GAINS EARNED ON SUCH SALE OF SUCH ASSET IS 20% AND NOT 30% WHICH IS APPLICABLE TO THE SHORT TE RM CAPITAL GAINS EARNED ON SALE OF ASSETS HELD FOR LESS THAN 36 MONTHS. 7. ASSESSEE ALSO RAISED THE LEGAL ISSUE OF RECTIFYI NG THE ORDER WITHOUT ISSUING THE NOTICE U/S.154 OF THE ACT AND WITHOUT A FFORDING OPPORTUNITY. ASSESSEE RELIED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SMITA CONDUCTORS LTD., MUMBAI VS. DCIT, RANGE- 3(3), MUMBAI IN ITA ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 4 NO.4004/MUM/2011 FOR A.Y. 2006-07 ORDER DATED 17-09 -2013 FOR THE PROPOSITION THAT THE RATE OF 20% IS APPLICABLE TO T HE GAINS EARNED ON SALE OF DEPRECIABLE ASSETS. ON CONSIDERING THE SAME, THE C IT(A) ALLOWED THE APPEAL OF THE ASSESSEE RELYING ON THE SAID JUDGMENT OF HON BLE BOMBAY HIGH COURT IN THE CASE OF ACE BUILDERS PVT. LTD. (SUPRA). AO WAS DIRECTED TO TAX THE SAID SHORT TERM CAPITAL GAINS @20% AFTER VERIFYING THE A SSETS TRANSFERRED WERE HELD BY THE ASSESSEE FOR MORE THAN 3 YEARS. WHILE GIVIN G THE RELIEF TO THE ASSESSEE, THE CIT(A) ALSO CONSIDERED THE FACT THAT THE ISSUE RAISED BY THE ASSESSEE IS CERTAINLY DEBATABLE ONE AND THERE EXI STS TWO VIEWS IN THAT CASE. THE PROVISIONS OF SECTION 154 OF THE ACT HAS NO APP LICATION. HE RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF T. S. BALARAM, ITO VS.VOLKART BROS. 82 ITR 50 (SC) FOR THIS PROPOSITIO N. 8. BEFORE US, LD. DR FOR THE REVENUE SUBMITTED THAT THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. A CE BUILDERS PVT. LTD. 28 ITR 2010 (BOM.) IS NOT RELEVANT FOR THE PROPOSITION WHICH THE CIT(A) MISTAKENLY BELIEVED IN. BRINING OUR ATTENTION TO T HE RELEVANT PARAGRAPHS OF THE JUDGMENT, LD. DR SUBMITTED THAT THE SAID JUDGMENT I S RELEVANT FOR THE LEGAL FICTION CREATED IN SECTION 50 IS TO DEEM THE CAPITA L GAINS AS SHORT TERM CAPITAL GAIN AND NOT TO DEEM AN ASSET AS A SHORT TERM CAPIT AL ASSET AND, THEREFORE, IT CANNOT BE STATED THAT SECTION 50 CONVERTS THE LONG TERM CAPITAL ASSET INTO SHORT TERM CAPITAL ASSET . FURTHER, LD. DR MENTIONED THAT THE SAID RATIO WA S DELIVERED IN THE CONTEXT OF THE FACT THAT GAINS WER E RE-INVESTED IN ELIGIBLE NEW ASSETS U/S.54E OF THE ACT. HE MENTIONED THAT THE H ONBLE HIGH COURT HELD THAT PROVISIONS OF SECTION 54E OF THE ACT DOES NOT MAKE ANY DISTINCTION BETWEEN THE DEPRECIABLE ASSET AND NON-DEPRECIABLE ASSET AND THEREFORE, THE EXEMPTION/DEDUCTION AVAILABLE U/S.54E OF THE ACT CA NNOT BE DENIED BY REFERRING TO THE FICTION CREATED IN SECTION 50 OF T HE ACT AND ACCORDINGLY, THE ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 5 SAME WAS DECIDED IN FAVOUR OF THE ASSESSEE. THEREF ORE, AS PER THE HONBLE HIGH COURT, THE ASSESSEE IS ENTITLED TO EXEMPTION U /S.54E OF THE ACT IN RESPECT OF THE CAPITAL GAINS ARISING ON TRANSFER OF THE DEP RECIABLE LONG TERM CAPITAL ASSET HELD FOR LONGER THAN 36 MONTHS. AS PER THE S AID JUDGMENT, THE SAID FICTIONAL SHORT TERM CAPITAL GAINS MUST NOT TAKE AWAY THE RIGHT OF CLAIM OF DEDUCTION U/S.54 OF THE ACT WHEN THE ASSET INVOLVED IN LONG TERM CAPITAL ASSET. 9. REFERRING TO PARA NOS. 20 TO 22 OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ACE BUILDERS PVT. LTD. (S UPRA), LD. DR MENTIONED THAT EVEN THOUGH THE ENTIRE BLOCK OF ASSETS TRANSFERRED ARE LONG TERM CAPITAL ASSETS AND THE CONSIDERATION RECEIVED ON SUCH TRANSFER EXC EEDS THE WRITTEN DOWN VALUE, THE SAID EXCESS IS LIABLE TO BE TAXED AS CAP ITAL ASSETS ARISING OUT OF SHORT TERM CAPITAL GAINS AND TAXED ACCORDINGLY. EXPLAINI NG THE FACTS OF THIS CASE OF ACE BUILDERS PVT. LTD. (SUPRA) AS WELL AS THE LEGAL PROVISIONS INTERPRETED BY THE HONBLE HIGH COURT, LD. DR SUBMITTED THAT THE SAID SHORT TERM CAPITAL GAINS HAS TO BE TAXED @30% DESPITE THE FACT THAT THE ASSE TS INVOLVED ARE LONG TERM CAPITAL ASSETS. 10. FURTHER, LD. DR FILED A COPY OF THE ORDER OF T HE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S.RATHI BROTHERS MADRAS L IMITED VS. ACIT, CIRCLE-6, PUNE FOR THE A.Y. 2008-09 ORDER DATED 30-10-2014 AN D SUBMITTED THAT SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE SAID ORDER DI SMISSING THE APPEAL OF THE ASSESSEE AND UPHELD THE ORDER OF THE CIT(A). IN TH AT CASE, CIT(A) UPHELD THE AOS DECISION IN COMPUTING THE TAX @30% ON THE GAINS ATTRIBUTABLE TO THE LONG TERM CAPITAL ASSETS U/S.50 OF THE ACT. LD. DR BROU GHT OUR ATTENTION TO THE CONTENTS OF PARA 5.3 OF THE ORDER OF THE TRIBUNAL. 11. THUS, IT IS THE CASE OF THE REVENUE THAT THE RE VENUE THAT IN CASE OF ABSENCE OF RE-INVESTMENT OF THE GAINS EARNED BY THE ASSESSEE ON SALE OF LONG ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 6 TERM DEPRECIABLE ASSETS, THE GAINS RELATABLE TO THE TRANSFER OF THE LONG TERM CAPITAL ASSETS, SHOULD BE TAXED @30%, THE RATE APPL ICABLE TO SHORT TERM CAPITAL GAINS. HOWEVER, THE REVENUE HAS NOT RAISED ANY GROUND ON THE DECISION OF CIT(A) IN GRANTING RELIEF TO THE ASSESS EE ON THE ARGUMENT RELATABLE TO THE DEBATABILITY OF THE ISSUE WHICH IS OUTSIDE T HE SCOPE OF PROVISIONS OF SECTION 154 OF THE ACT. IN EFFECT, THE REVENUE ACC EPTED THE FINDING OF THE CIT(A) SO FAR AS THE ALLOWABILITY OF THE RELIEF TO ASSESSEE ON THE GROUND OF JURISDICTION. NORMALLY, THE JURISDICTION GOES TO T HE REST OF THE PROCEEDINGS U/S.154 OF THE ACT. 12. PER CONTRA, SHRI J.P. BAIRAGRA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND THE SAME SHOULD NOT BE DISTURBED. THE CIT(A) HAS RIGHTLY GRANTED RELIEF T O THE ASSESSEE ON ACCOUNT OF APPLICABLE RATIO OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF ACE BUILDERS PVT. LTD. (SUPRA) AND ALSO ON ACCOUNT OF DEBATABILITY OF THE ISSUE IN DISPUTE. BRINGING OUR ATTENTION TO THE DECISION OF MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF SMITA CONDUCTORS LTD. VS. DCIT, RANGE-3(3), MUMBAI ORDER DATED 17- 09-2013, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE GAINS RELATABLE TO THE TRANSFER OF DEPRECIABLE LONG TERM CAPITAL ASSET S WOULD RETAIN THE CHARACTER OF LONG TERM CAPITAL ASSET FOR THE PURPOSE OF ALL O THER PROVISIONS OF THE ACT, MEANING THEREBY, IT IS THE VIEW OF THE LD. COUNSEL THAT THE GAINS RELATABLE TO THE SALE OF LONG TERM CAPITAL ASSETS IS TAXABLE @20 % WHICH IS APPLICABLE TO THE LONG TERM CAPITAL GAINS AS PER THE PROVISIONS OF SE CTION 112 OF THE ACT. FURTHER, HE SUBMITTED THAT THE ORDER OF THE TRIBUNA L IN THE CASE OF RATHI BROTHERS MADRAS LIMITED DATED 30-10-2014 WAS NOT AV AILABLE TO THE CIT(A) AT THE RELEVANT POINT OF TIME. LD. COUNSEL FOR THE AS SESSEE IS OF THE VIEW THAT THERE EXIST DIVERGENT DECISIONS ON THE SAME ISSUE A ND THE SAME MAKES THE ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 7 ISSUE DEBATABLE. HENCE, THE PROVISIONS OF SECTION 154 OF THE ACT NEED NOT BE INVOKED FOR RECTIFYING THE MISTAKE, IF ANY. 13. FURTHER, ELABORATING THE SAME, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN QUESTION IS A DEBATABLE ONE AND R ELIED ON VARIOUS LEGAL PROPOSITIONS DELIVERED BY VARIOUS BENCHES OF THE TR IBUNAL ON THIS ISSUE. FOR EXAMPLE, FOR DEMONSTRATING THE EXISTENCE OF TWO VIE WS AND THEREFORE DEBATABILITY, LD. COUNSEL FOR THE ASSESSEE RELIED O N THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RATHI BROTHERS MADRA S LIMITED VS. ACIT, CIRCLE-6, PUNE DATED 30-10-2014 AGAINST THE ASSESSEE AND THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SMITA CONDUCTO RS LTD. VS. DCIT, RANGE- 3(3), MUMBAI ORDER DATED 17-09-2013IN FAVOUR OF THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE CITED OTHER DECISIONS IN FAVOUR OF THE ASSESSEE AND THEY INCLUDE : 1. MANALI INVESTS VS. ACIT 139 TTJ 411 (MUMBAI) 2. CIT VS. MANALI INVESTMENT 219 TAXMAN 113 (BOMBAY) 3. CIT VS. V.S. DEMPO COMPANY LTD. 387 ITR 354 (SC) 4. CIT VS. PARRYS (EASTERN) (P) LTD., 384 ITR 264 (BOM BAY) 5. CIT VS. CADBURY INDIA LTD. 229 TAXMAN 5 (BOMBAY) 6. CIT VS. UNITED PAPER INDUSTRIES 42 TAXMANN.COM 79 ( BOMBAY) 7. KOMAC INVESTMENTS & FINANCE (P) LTD. VS. ITO 14. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDER OF THE REVENUE. WE HAVE ALSO GONE THROUGH THE DECISIONS CITED BY BOTH THE PARTIES. THE LIMITED ISSUE FOR ADJUDICATION BEFORE US IS WHETHER THE RAT E OF 20% IS APPLICABLE TO THE GAINS EARNED ON TRANSFER OF THE DEPRECIABLE LONG TE RM CAPITAL ASSETS WITHIN THE MEANING OF SECTION 50 OF THE ACT. THIS IS A CASE W HERE THE AO INITIALLY APPLIED THE TAX RATE OF 20% ON SUCH GAINS AND SUBSEQUENTLY, RECTIFIED BY TAXING THE SAID GAINS @30%. CIT(A) GRANTED RELIEF TO THE ASSE SSEE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F ACE BUILDERS PVT. LTD. (SUPRA) AND HELD THAT THE ISSUE IN QUESTION IS DEBA TABLE IN NATURE. IN THE ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 8 PROCESS, CIT(A) IGNORED THE FACTS OF THE PRESENT CA SE THAT THE SAID GAINS WERE NOT REINVESTED U/S.54 OR OTHER PROVISIONS FOR CLAIM OF DEDUCTION BY THE PRESENT ASSESSEE. TO THAT EXTENT, THE ORDER OF THE CIT(A) IS INCORRECT AND THEREFORE THE REVENUE IS JUSTIFIED. 15. HOWEVER, COMING TO THE APPLICABILITY OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF ACE BUILDERS PVT. LTD. (SUPRA) IS CONCE RNED, WE ARE OF THE VIEW THAT THE CIT(A) HAS NOT APPROPRIATELY APPLIED THE SAID J UDGMENT TO THE FACTS OF THE PRESENT CASE. WE PROCEED TO EXTRACT PARA NOS. 20 T O 22 OF THE JUDGMENT WHICH READS AS UNDER : 20. SECTION 50 IS A SPECIAL PROVISION FOR COMPUTIN G THE CAPITAL GAINS IN THE CASE OF DEPRECIABLE ASSETS AND THE SAME BEING RELEV ANT FOR THE PURPOSE HEREIN, IS QUOTED HEREIN BELOW : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21. ON PERUSAL OF THE AFORESAID PROVISIONS, IT IS S EEN THAT SECTION 45 IS A CHARGING SECTION AND SECTIONS 48 AND 49 ARE THE MAC HINERY SECTIONS FOR COMPUTATION OF CAPITAL GAINS. HOWEVER, SECTION 50 C ARVES OUT AN EXCEPTION IN RESPECT OF DEPRECIABLE ASSETS AND PROVIDES THAT WHE RE DEPRECIATION HAS BEEN CLAIMED AND ALLOWED ON THE ASSET, THEN, THE COMPUTA TION OF CAPITAL GAIN ON TRANSFER OF SUCH ASSET UNDER SECTIONS 48 AND 49 SHA LL BE AS MODIFIED UNDER SECTION 50. IN OTHER WORDS, SECTION 50 PROVID ES A DIFFERENT METHOD FOR COMPUTATION OF CAPITAL GAIN IN THE CASE OF CAPITAL ASSETS ON WHICH DEPRECIATION HAS BEEN ALLOWED. 22. UNDER THE MACHINERY, SECTIONS, THE CAPITAL GAIN S ARE COMPUTED BY DEDUCTING FROM THE CONSIDERATION RECEIVED ON TRANSF ER OF A CAPITAL ASSET, THE COST OF ACQUISITION, THE COST OF IMPROVEMENT AND TH E EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER. THE MEANING OF THE EX PRESSIONS 'COST OF IMPROVEMENT' AND 'COST OF ACQUISITION' USED IN SECT IONS 48 AND 49 ARE GIVEN IN SECTION 55. AS THE DEPRECIABLE CAPITAL ASSETS HA VE ALSO AVAILED DEPRECIATION ALLOWANCE UNDER SECTION 32, SECTION 50 PROVIDES FOR A SPECIAL PROCEDURE FOR COMPUTATION OF CAPITAL GAINS IN THE CASE OF DEPRECI ABLE ASSETS. SECTION 50(1) DEALS WITH THE CASES WHERE ANY BLOCK OF DEPRE CIABLE ASSETS DOES NOT CEASE TO EXIST ON ACCOUNT OF TRANSFER AND SECTION 5 0(2) DEALS WITH CASES WHERE ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 9 THE BLOCK OF DEPRECIABLE ASSETS CEASE TO EXIST IN T HAT BLOCK ON ACCOUNT OF TRANSFER DURING THE PREVIOUS YEAR. IN THE PRESENT C ASE, ON TRANSFER OF DEPRECIABLE CAPITAL ASSET THE ENTIRE BLOCK OF ASSET S HAS CEASED TO EXIST AND, THEREFORE, SECTION 50(2) IS ATTRACTED. THE EFFECT O F SECTION 50(2) IS THAT WHERE THE CONSIDERATION RECEIVED ON TRANSFER OF ALL THE D EPRECIABLE ASSETS IN THE BLOCK EXCEEDS THE WRITTEN DOWN VALUE OF THE BLOCK, THEN THE EXCESS IS TAXABLE AS A DEEMED SHORT-TERM CAPITAL GAINS. IN OTHER WORD S, EVEN THOUGH THE ENTIRE BLOCK OF ASSETS TRANSFERRED ARE LONG-TERM CAPITAL A SSETS AND THE CONSIDERATION RECEIVED ON SUCH TRANSFER EXCEEDS THE WRITTEN DOWN VALUE, THE SAID EXCESS IS LIABLE TO BE TREATED AS CAPITAL GAIN ARISING OUT OF A SHORT-TERM CAPITAL ASSET AND TAXED ACCORDINGLY. 16. FROM THE ABOVE, IT IS THE RATIO OF THE JUDGMENT THAT LONG TERM CAPITAL ASSET LINKED LONG TERM CAPITAL GAINS ARE ELIGIBLE F OR REINVESTMENT IN THE ELIGIBLE ASSETS FOR PURPOSE OF CLAIM OF DEDUCTION U/S.54E OF THE ACT. BUT IN THIS CASE, ASSESSEE HAS NOT RE-INVESTED GAINS FOR CLAIMING OF DEDUCTION/EXEMPTION UNDER THE ACT AND HE PAID TAXES ON SUCH GAINS. THIS IS T HE CASE WHERE ASSESSEE PREFERRED TO PAY THE TAXED ON THE GAINS EARNED BY H IM ON TRANSFER OF THE DEPRECIABLE LONG TERM CAPITAL ASSETS. THEREFORE, T HE FACTS OF ACE BUILDERS PVT. LTD. (SUPRA) ARE DIFFERENT AS IT WAS A CASE OF CLAI MING OF DEDUCTION U/S.54E OF THE ACT. THE HONBLE HIGH COURT HAS ALLOWED SUCH E XEMPTION IN THAT CASE. THEREFORE, THE JUDGMENT OF ACE BUILDERS PVT. LTD. ( SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE , THE QUESTION FOR ADJUDICATION REVOLVES AROUND THE APPLICABLE RATE O F TAX ON THE SHORT TERM CAPITAL GAINS LINKED TO THE DEPRECIABLE LONG TERM C APITAL ASSETS U/S.50 OF THE ACT. 17. AGAINST THE ASSESSEE, THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IS RELEVANT. IN THIS CASE, WHEN IT COMES TO THE COORD INATE BENCH DECISION OF THE TRIBUNAL IN THE CASE OF RATHI BROTHERS MADRAS LIMIT ED VS. ACIT, CIRCLE-6, PUNE DATED 30-10-2014, DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF 30% ON APPLICABLE TAX RATE. WE PROCEED TO EXTRACT PARA NO .5.3 WHICH READS AS UNDER 5.3 IT IS CLEAR FROM THE LANGUAGE USED BY THE LEG ISLATURE THAT IF THE LONG TERM CAPITAL GAIN IS COMPUTED THEN IT WILL SUFFER T HE TAX @20% AS AGAINST THE NORMAL RATE OF INCOME- TAX. MOREOVER, IN THE ACE BU ILDERS PVT. LTD., (SUPRA) THEIR LORDSHIPS HAVE EXPLAINED THAT IF THE CAPITAL GAIN IS COMPUTED AS PROVIDED ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 10 U/S.50 THEN THE CAPITAL GAINS TAX WILL BE CHARGED A S IF SUCH CAPITAL GAIN HAS ARISEN OUT OF SHORT TERM CAPITAL ASSET. WE HAVE TO INTERPRET THE JUDGEMENT OR DECISION AS A WHOLE AND WE CANNOT INTERPRET IN THE PIECEMEAL TO UNDERSTAND THE RATIO DECIDENDI. 18. ON THE CONTRARY, THE DECISION OF MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF M/S.SMITA CONDUCTORS LTD. DECIDED THE SIMIL AR ISSUE IN FAVOUR OF THE ASSESSEE, I.E. IN FAVOUR OF 20% AS THE APPLICABLE T AX RATE. RELEVANT EXTRACTS FROM PARA 2.5 OF THE SAID DECISION READ AS UNDER : 2.5 THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GRO UND THAT FOR THE PURPOSE OF APPLICATION OF TAX RATE, THE CAPITAL GAIN IN CAS E OF THE ASSESSEE HAS TO BE ASSED AS LONG TERM CAPITAL GAIN AS THE FLAT HAD BEE N HELD BY THE ASSESSEE FOR MORE THAN THREE YEARS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE SAME VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF TRIBUNAL IN CASE OF MANALI INVESTMENTS V. ASSTT. CIT (2011) 45 SOT 128/ 10 TAXMANN.COM 293 IN WHICH IT HAS BEEN HELD THAT THE PRESCRIPTIONS OF SE CTION 50 ARE TO BE EXTENDED ONLY TO THE STAGE OF COMPUTATION OF CAPITAL GAIN AN D, THEREFORE, CAPITAL GAIN RESULTING FROM TRANSFER OF DEPRECIABLE ASSET WHICH WAS HELD FOR MORE THAN THREE YEARS WOULD RETAIN THE CHARACTER OF LONG TERM CAPITAL GAIN FOR THE PURPOSE OF ALL OTHER PROVISIONS OF THE ACT. IN THI S CASE THE LD. AR FOR THE ASSESSEE SUBMITTED THAT FLAT HAD BEEN HELD FOR 15 T O 20 YEARS WHICH IS SUPPORTED BY THE FACT THAT COST OF THE FLAT AS SHOW N IN THE BALANCE SHEET WAS ONLY RS.1,30,000/-. THEREFORE, IF THE FLAT IS HELD FOR MORE THAN THREE YEARS THE TAX RATE HAS TO BE APPLIED AS PROVIDED IN SECTION 1 12 OF THE IT ACT APPLICABLE IN RESPECT OF CAPITAL GAIN ARISING FROM TRANSFER OF LONG TERM CAPITAL ASSET. 2.6 WE, THEREFORE, HELD THAT, FOR THE PURPOSE OF CO MPUTATION OF CAPITAL GAIN, THE FLAT HAS TO BE TREATED AS SHORT TERM CAPI TAL GAIN U/S.50 OF THE IT ACT, BUT FOR THE PURPOSE OF APPLICABILITY OF TAX RATE IT HAS TO BE TREATED AS LONG TERM CAPITAL GAIN IF HELD FOR MORE THAN THREE YEARS. WE ACCORDINGLY DIRECT THE AO TO COMPUTE THE CAPITAL GAIN FROM THE SALE OF FLAT AND APPLY THE APPROPRIATE TAX RATE AFTER NECESSARY VERIFICATION IN THE LIGHT OF O BSERVATIONS MADE IN THIS ORDER. 19. THE DECISION OF TRIBUNAL IN THE CASE OF SMITA C ONDUCTORS LTD. (SUPRA) IS IN TUNE WITH ANOTHER DECISION OF THE TRIBUNAL IN TH E CASE OF MANALI INVESTMENTS 45 SOT 128. IT IS ALSO RELEVANT TO MENTION THAT T HE SAID DECISION IN THE CASE OF MANALI INVESTMENTS IS APPROVED BY THE JURISDICTI ONAL HIGH COURT. THEN, TWO VIEWS EXISTS ON THE SAME ISSUE OF APPLICABLE TAX R ATE ON THE LONG TERM CAPITAL ASSETS LINKED SHORT TERM CAPITAL GAINS. THEREFORE, THE EXISTENCE OF DEBATE IS EVIDENT ON THIS ISSUE. FURTHER, IT IS DECIDED ISSU E THAT THE ARGUMENTS RELATING TO DEBATABILITY GOES TO THE ROOT OF THE MATTER AN D THE JURISDICTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 154 OF THE AC T. IN OUR VIEW, THE ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 11 APPLICABLE RATE OF TAX ON THE DEEMED SHORT TERM CAP ITAL GAINS GENERATED OUT OF DEPRECIABLE LONG TERM CAPITAL ASSETS IS THE MATTER OF DEBATE. THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF ACE BUILDE RS PVT. LTD. (SUPRA) IS ON THE FACTS OF REINVESTMENT OF SUCH LONG TERM CAPITAL ASS ETS-LINKED DEEMED SHORT TERM CAPITAL GAINS; WHEREAS IN THE ASSESSEES CASE, IT IS NOT A CASE OF REINVESTMENT. THIS MAKES THE DIFFERENCE. THEREFOR E, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) SHOULD BE CONFIRMED ON THE GROUND OF DEBATABILITY LINKED TO THE JURISDICTION OF AO U/S.154 OF THE ACT . 20. FURTHER, HOWEVER, WE HAVE CONSIDERED THE ARGUME NTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE CIT(A) ALLOWED TH E APPEAL OF THE ASSESSEE BASING ON THE ARGUMENTS THAT REVOLVE AROUND THE DE BATABILITY ON THIS ISSUE. EXPLAINING THE SAME, LD. COUNSEL SUBMITTED THAT, FO R THE RATE PURPOSES, THE APPLICABLE TAX RATE ON THE CAPITAL GAINS RELATABLE TO SALE OF TRANSFER OF THE DEPRECIABLE LONG TERM CAPITAL ASSETS AND WHICH ARE NOT REINVESTED U/S.54E OF THE ACT CONSTITUTE LONG TERM CAPITAL GAINS OR SHORT TERM CAPITAL GAINS IS A MATTER OF DEBATE. ON SEEING THE DEBATABILITY, CIT( A) GRANTED RELIEF. ON CONSIDERING THE SAME, WE ARE OF THE OPINION THAT TH E AO INVALIDLY INVOKED THE PROVISIONS OF SECTION 154 OF THE ACT IN THIS CASE. ACCORDINGLY, THE RELEVANT GROUND RAISED BY THE REVENUE ARE DISMISSED. 21. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA NO.991/PUN/2015 (BY REVENUE : 22. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A), AURANGABAD HAS ERRED IN DELETING THE ADDITION OF RS . 67,58,301/- MADE ON ACCOUNT OF SUPPRESSED PRODUCTION OF TMT BARS . 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), AURANGABAD HAS ERRED IN NOT FOLLOWING HIS OWN ORDER S IN THE OTHER CASES OF STEEL MANUFACTURERS FROM JALNA PASSED EARLIER WHERE IN HE HAD ESTIMATED THE PROFIT @ 4% OF THE ESTIMATED SALE VALUE OF SUPPRESS ED PRODUCTION. ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 12 3. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A), AURANGABAD HAS ERRED IN RELYING UPON THE ORDER OF T HE ITAT IN THE CASE OF SRJ PEETY STEELS PVT. LTD., JALNA FOR AYS 2007-08 & 2008-09 DT. 16/0112015 WHEREIN SUCH ADDITION HAS BEEN DELETED. 4. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), AURANGABAD HAS ERRED IN NOT APPRECIATING THE FACT T HAT THE ASSESSEE COMPANY IS ENGAGED IN UNACCOUNTED PRODUCTION OF GOODS WHICH HAS BEEN SUBSTANTIATED SEPARATELY BY THE CBI IN THE CASE AGAINST THE DIREC TOR OF THE COMPANY. 5. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A), AURANGABAD BE QUASHED AND THAT THE ORDER OF THE AO BE RESTORED. 23. BRIEFLY STATED RELEVANT FACTS ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT THERE IS HUGE DEVIATIO N IN ELECTRICITY UNIT CONSUMPTION FROM MIN. UNIT CONSUMPTION FROM AUGUST, 2010 TO DECEMBER, 2010. IN AUGUST, 2010, THE ASSESSEE HAS SHOWN @113 0 UNITS PER MT WHEREAS IN DECEMBER, 2010 THE ASSESSEE HAS SHOWN @869 UNITS PER MT., THE VARIATION IS ABOUT 30%. THE AO HELD THAT THE ASSESSEE HAS NO T DISCLOSED THE CONSUMPTION OF MATERIAL AS WELL AS PRODUCTION OF FI NISHED GOODS ACCURATELY. THE AO CALLED FOR THE DAY-TO-DAY STOCK REGISTER, DA Y-TO-DAY ELECTRICITY CONSUMPTION REGISTER AND DAY-TO-DAY PRODUCTION REGI STER TO ASSESS THE MANUFACTURING RESULTS. THE EXPLANATION OFFERED BY T HE ASSESSEE AND THE LOGIC BEHIND ITS PRODUCTION CLAIMING OVERALL 7% BURNING LOSS WERE NOT ACCEPTED BY THE AO. BASED ON THE COMPARABLE INSTANCE ADOPTED B Y THE AO IN THE CASE OF ASSESSEE NAMED JAILAXMI CASTING AND ALLOYS PVT. LTD ., PAITHAN, AURANGABAD, WHICH IS IN THE SIMILAR LINE OF BUSINESS, THE AO CA ME TO THE CONCLUSION THAT ELECTRICITY CONSUMPTION SHOWN BY THE ASSESSEE IS TO O HIGH. REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S.145(3) OF THE ACT, THE AO ADOPTED THE ELECTRICITY CONSUMPTION @944 PER MT AS ADOPTED IN T HE CASE OF JAILAXMI CASTING AND ALLOYS PVT. LTD., (SUPRA) AND COMPUTED THE INCOME OF THE ASSESSEE AT RS.2,19,34,872/- AS SUPPRESSED PRODUCTION. 24. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT T HERE IS NO CORROBORATIVE EVIDENCE/BASIS FOR THE AO TO ESTIMATE THE SUPPRESSE D PRODUCTION AT ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 13 RS.2,19,34,872/-. HE SUBMITTED THAT IN THE ASSESSE ES THE AO ACCEPTED 1026 UNITS PER MT FOR THE A.YRS. 2007-08 TO 2010-11. SIN CE THE ELECTRICITY CONSUMPTION SHOWN FOR THE YEAR UNDER CONSIDERATION IS BELOW 1026 UNITS PER MT THE SAME SHOULD BE ACCEPTED. FURTHER, HE SUBMIT TED THAT CONSUMPTION OF ELECTRICITY DEPENDS ON VARIOUS FACTORS, LIKE UNSCHE DULED SHUT DOWN, IMPROPER SUPPLY OF ELECTRICITY UNSKILLED LABOURS, MODEL OF FURNACE, QUALITY OF RAW MATERIAL, CHANGE IN SETTINGS OF GENERATING PANEL, W EAR AND TEAR OF MACHINERY, ETC. AND IT CANNOT REMAIN STATIC. BOOKS OF ACCOUNTS WERE AUDITED AND NO DEFICIENCIES WERE POINTED OUT BY THE AO. 25. CONSIDERING THE ARGUMENTS OF THE ASSESSEE, THE CIT(A) RELYING ON THE DECISION OF HONBLE CE&S APPELLATE IN THE CASE OF S RJ PEETY STEELS PVT. LTD. & OTHERS ORDER DT. 28-07-2014 AND THE DECISION OF TH E PUNE BENCH OF THE TRIBUNAL, IN THE CASE OF THE SRJ PEETY STEELS PVT. LTD. IN ITA NOS. 123 AND 124/PN/2012 FOR THE A.YRS. 2007-08 AND 2008-09 ORDE R DATED 16-01-2015, REVERSED THE ORDER OF THE AO AND DELETED THE ENTIRE ADDITION OF RS.2,19,34,872/- MADE ON ACCOUNT OF SUPPRESSED PROD UCTION IN THE HANDS OF THE ASSESSEE. 26. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 27. WE HEARD BOTH THE SIDES AND PERUSED THE ORDER S OF THE REVENUE AND THE ELABORATE DISCUSSION OF THE CIT(A) ON THE ISSUE OF SUPPRESSED PRODUCTION GIVEN IN PARA NOS. 5.3 TO 5.6. WE FIND RELEVANT TO EXTRA CT THE OPERATIONAL PARAS OF THE SAID CIT(A) WHICH READS AS UNDER : 5.5 ON PERUSAL OF THE RIVAL CONTENTIONS MENTIONED I N THE EARLIER PARAGRAPHS IT HAS BEEN OBSERVED AS UNDER (I) THE FIRST OBJECTION RAISED BY THE AO. IS THAT THERE IS SUBSTANTIAL VARIATION IN CONSUMPTION OF ELECTRICITY FOR PRODUCI NG 1 MT FINISHED GOODS IN THE VARIOUS MONTHS DURING THE YEAR UNDER A PPEAL HAS ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 14 BEEN REASONABLY REBUTTED BY THE APPELLANT IN THE AB OVE MENTIONED SUBMISSION IN PARA-I & 2, FILED DURING ASSESSMENT PROCEEDINGS. IN VIEW OF VARIOUS REASONS POINTED OUT BY THE AR. OF T HE APPELLANT, IT IS EVIDENT THAT THE ELECTRICITY CONSUMPTION FOR PRO DUCTION CANNOT REMAIN STATIC DURING VARIOUS MONTHS OF THE YEAR (II) THE SECOND OBJECTION RAISED BY THE AO. IS THAT THE APPELLANT COMPANY HAS NOT CORRECTLY DISCLOSED CONSUMPTION OF MATERIAL AS WELL AS PRODUCTION OF FINISHED GOODS . THE OBJECTION OF THE AO. IS NOT SUPPORTED BY ANY CORROBORATI V E EVIDENCE. THE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN REGULARLY MAINT AINED AND AUDITED AND THE SAME HAVE BEEN CERTIFIED TO BE REFL ECTING TRUE AND FAIR VIEW OF ITS FINANCIAL POSITION BY A CHARTERED ACCOUNTANT. THE SECOND OBJECTION RAISED BY THE A.O. IS THEREFORE NO T JUSTIFIED. (III) THE THIRD OBJECTION RAISED BY THE AO. IS THAT THE A SSESSEE COMPANY HAS NOT MAINTAINED DAY TO DAY REGISTER FOR PRODUCTION, DAY TO DAY ELECTRICITY CONSUMPTION AND BREAK DOWN REGISTER, TH OUGH IT IS MANDATORY FOR THE APPELLANT COMPANY TO MAINTAIN SUC H RECORD. IN THIS REGARD IT HAS BEEN NOTICED THAT THE APPELLANT HAS F ILED DAY TO DAY STOCK REGISTER AND DAY TO DAY PRODUCTION REGISTER WITH TH E AO. DURING TH E ASSESSMENT PROCEEDINGS. AS REGARDS DAY TO DAY ELECT RICITY CONSUMPTION REGISTER, THE APPELLANT HAS REASONABLY POINTED OUT THAT IN VIEW OF PAPER SEAL ATTESTED BY ELECTRICITY DEPARTMENT ON THE ELEC TRIC METER AND ALSO FOR SAFETY REASONS, DAY TO DAY ELECTRICITY CON SUMPTION CANNOT BE NOTED. THE THIRD OBJECTION RAISED BY THE AO. IS THE REFORE NOT JUSTIFIED. (IV) THE FOURTH OBJECTION RAISED BY THE AO. IS THAT THE CLAIM OF THE APPELLANT FOR OVERALL BURNING LOSS @ 7% IS NOT JUSTIFIABLE. IN THIS REGARD IT HAS BEEN NOTICED THAT TH E VARIOUS STEEL MANUFACTURING UNITS IN . JALNA AND SURROUNDING AREA ARE SHOWING BURNING LOSS AT AR OUND 7%. THE FOURTH OBJECTION RAISED BY THE A.O . IS THEREFORE NOT JUSTIFIED. (V) THE FIFTH OBJECTION RAISED BY THE AO. IS THAT THE A VERAGE CONSUMPTION OF ELECTRICITY FOR PRODUCING IMT FINISHED GOODS HAS B E EN DISCLOSED BY JAILA X MI CASTING & ALLOYS PVT. LTD . , PAITHAN AT 787 ELECTRICITY UNITS PER MT AS AGAINST 982.82 UNITS PER MT DISCLOSED BY THE APPELLANT COMPANY. IN THIS REGARD IT HAS BEEN NOTICED THAT UP TO THE PRECEDING YEAR I . E. AY . 2010-11, THE VARIOUS ASSESSING OFFICERS OF AURANGAB AD AND SURROUNDING AREA HAVE HELD, ON THE BASIS OF VAR IOUS TECHNICAL REPORTS AND INVESTIGATION AND STUDY BY EXCISE DEPAR TMENT THAT FOR PRODUCING 1 MT OF MS INGOTS/BILLETS 1026 ELECTRICIT Y UNITS ARE REQUIRED. IT HAS ALSO BEEN MENTIONED IN THE SAID TECHNICAL RE PORTS AND STUDY PAPERS THAT THE REQUIREMENT OF ELECTRICITY UNITS FO R PRODUCTION OF MS BILLETS DEPENDS UPON RAW MATERIAL USED AND ALSO VAR IOUS OTHER FACTORS. IN ONE OF THE REPORT, SUBMITTED BY THE MANUFACTURER S OF STEEL IN JALNA & SURROUNDING AREA, IT HAS BEEN MENTIONED THAT THE EL ECTRICITY CONSUMPTION IS MUCH HIGH WHEN THE SPONGE IRON IS US ED AND ON LOWER SIDE WHEN SCRAP MATERIAL OF IRON IS USED; FURTHER THE EL ECTRICITY CONSUMPTION ALSO DEPENDS UPON THE COMBINATION OF SPONGE IRON AND SCRAP MATER IAL OF IRON USED IN PRODUCTION; THE CONSUMPTION OF ELECTRICITY REQUIRED VARIES FROM 1000 UNITS TO 1800 UNITS PER MT OF INGOTS DEPENDING UPON THE RAW MATERIAL USED AND QUALITY OF THE SAME. IN THE CASE OF THE APPELLANT THE ELECTRICITY CONSUM PTION IS 982.82 UNITS PER MT AS MENTIONED BY THE A . O. IN THE ASSESSMENT ORDER WHICH IS LESS THAN 1026 ELECTRICITY UNITS PER MT AS HELD TO BE REQUIRED BY THE ASSESSING OFFICERS WHILE ASSESSING INCOME OF VARIOU S STEEL MANUFACTURING ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 15 UNITS OF JALNA AND SURROUNDING AREA UPTO A . Y . 2010 - 11 . THE ' FIFTH OBJECTION RAISED BY THE A . O. IS, THEREFORE, NOT JUSTIFIED. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A . O. IS NOT JUSTIFIED IN REJECTING BOOK RESULTS BY IN VOKING PROVISIONS OF SECTION 145(3) OF THE ACT. THE FIRST ISSUE IS DECIDED IN FA V OUR OF THE APPELLANT. 5.6 THE SECOND ISSUE TO BE DECIDED IS, WHETHER THE A . O. IS JUSTIFIED IN ESTIMATING SUPPRESSED PRODUCTION BY PRESUMING THAT 944 ELECTRICITY UNITS ARE REQUIRED FOR PRODUCING 1 MT FINISHED GOODS. IN THIS REGARD IT HAS BEEN NOTICED THAT IN THE CASES OF VARIOUS STEEL MANUFACT URING UNITS OF JALNA AND SURROUNDING AREA, INCLUDING THE APPELLANT COMPANY, THE ASSESSING OFFICERS HAVE HELD UPTO A . Y . 2010-11, ON THE BASIS OF VARIOUS TECHNICAL REPORTS AND INVESTIGATION AND STUDY BY EXCISE DEPARTMENT THAT F OR PRODUCING 1 MT OF MS INGOTS/BILLETS 1026 ELECTRICITY UNITS ARE REQUIR ED. IT HAS ALSO BEEN MENTIONED IN THE SAID TECHNICAL REPORTS AND STUDY P APERS THAT THE REQUIREMENT OF ELECTRICITY UNITS FOR PRODUCTION OF MS BILLETS DEPENDS UPON RAW MATERIAL USED AND ALSO VARIOUS OTHER FACTORS. T HE VARIOUS MANUFACTURERS OF STEEL LOCATED AT JALNA AND SURROUNDING AREA INCLUDING THE APPELLANT HAVE PREFERRED APPEAL IN TRIBUNAL AGAINST THE DECISION OF COMMISSIONER OF CENTRAL EXCISE, AURANGABAD THAT 102 6 UNITS OF ELECTRICITY ARE REQUIRED FOR PRODUCING 1 MT INGOTS/BILLETS. THE HON'BLE CE&S TAX APPELLATE TRIBUNAL VIDE ORDER 28/07/2014 IN THE CASE OF SRJ PEETY STEELS PVT. LTD. HAS HELD THA T THE EXCISE DEPARTMENT IS NOT JUSTIFIED IN HOLDING THAT FOR MAN UFACTURING OF 1 MT OF MS INGOTS/BILLETS, 1026 ELECTRICITY UNITS WOULD BE CONSUMED. THE HON'BLE CE&S TAX APPELLATE TRIBUNAL HAS ALSO HELD THAT THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS DEPARTMENT IS NOT JUSTIFIED IN RELYING ON T HE REPORT OF DR.BATRA. IN VIEW OF THE ABOVE FACTS AND ORDER OF HON ' BLE CE&S TAX APPELLATE TRIBUNAL, IT HAS BEEN SUBMITTED BY TH E LD . AR OF THE APPELLANT THAT THE ESTIMATIONS OF ALLEGED SUPPRESSE D PRODUCTION MADE BY THE CENTRAL EXCISE DEPARTMENT AND FOLLOWED BY THE A . O. AND THE CIT(APPEALS), ARE NOT JUSTIFIED AND HENCE THE ADDIT IONS MADE ON THE BASIS OF THE SAID ESTIMATION ARE ALSO REQUIRED TO B E DELETED. THE RATIO LAID DOWN B Y THE ABOVE REFERRED DECISION OF HON'BLE TRIBUNAL IS SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT. THE RELEVANT PORTION OF THE ORDER OF THE HON'BLE CE &S TAX APPELLATE TRIBUNAL, IN THE CASES OF SRJ PEETY STEELS PVT .LTD . & ORS . I . E. VARIOUS OTHER STEEL MANUFACTURERS IS REPRODUCED BELO W . . . . . . . . . . . . . . . . . . FURTHER, DURING THE COURSE OF APPELLATE PROCEEDINGS , THE LD. AR OF THE APPELLANT HAS FILED THE DECISION DATED 16/01/2015 O F HONBLE ITAT, PUNE IN QUANTUM APPEAL FOR A.YS.2007-08 AND 2008-09 IN T HE CASE OF SRJ PEETY STEELS PVT. LTD. AGAINST THE ADDITIONS MADE O N VARIOUS IN CONSUMPTION OF ELECTRICITY. IN THIS CASE, THE HON BLE ITAT, PUNE HAS DELETED THE ADDITIONS VIDE ORDER DATED 16/01/2015 I N ITA NOS. 123 & 124/PN/2012. IN VIEW OF THE RATIO LAID DOWN IN THE ABOVE REFERRE D DECISION OF HON'BLE CE&S APPELLATE TRIBUNAL, MUMBAI AND HON'BLE ITAT, PUNE, THE ESTIMATION OF 1026 ELECTRICITY UNITS FOR PRODUCTION OF 1 MT OF MS INGOTS/BILLETS ON THE BASIS OF CONSUMPTION OF ELECT RICITY UNITS IS NOT FOUND TO BE JUSTIFIED. IN VIEW OF THE ABOVE FACTS AND DEC ISION OF HON'BLE TRIBUNAL AND ALSO IN VIEW OF THE FACT THAT THE APPELLANT HAS REQUIRED 982.82 ELECTRICITY UNITS FOR PRODUCING 1 MT OF MS BILLETS WHICH CANNOT BE REGARDED ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 16 AS ABNORMALLY EXCESSIVE, I AM OF THE CONSIDERED VIE W THAT THE AO. IS NOT JUSTIFIED IN ESTIMATING SUPPRESSED PRODUCTION BY HO LDING THAT 944 ELECTRICITY UNITS ARE REQUIRED TO BE CONSUMED FOR P RODUCING I MT MS BILLETS. THE SECOND ISSUE IS ALSO DECIDED IN FAVOUR OF THE A PPELLANT. IN VIEW OF THE ABOVE FINDINGS IN FAVOUR OF THE APPE LLANT, WHILE DECIDING THE ABOVE MENTIONED TWO ISSUES, THE ADDITI ON OF RS.2 , 19,34,872 L - TOWARDS INCOME IN RESPECT OF SUPPRESSED PRODUCTION IS DELETED. THE AO, IS DIRECTED ACCORDINGLY. GROUND NO.1 IS ALLOWED. 28. FROM THE ABOVE, WE FIND THE CIT(A) HAS CONSIDER ED ALL THE ASPECTS WHICH LED THE ASSESSEE TO DISCLOSE 982.82 UNITS PER MT WHICH INCLUDE THAT THE ASSESSEE MAINTAINED THE RECORDS PROPERLY AND THE BO OKS OF ACCOUNTS HAVE BEEN AUDITED, NO METHOD FOR RECORDED DAY-TO-DAY ELE CTRICITY CONSUMPTION, DECLARATION OF 7% BURNING LOSS BY VARIOUS STEEL MAN UFACTURING UNITS IN JALNA & SURROUNDING AREA, REPORTS OF EXCISE DEPARTMENT THAT FOR 1 MT OF MS INGOTS/BILLETS, 1026 ELECTRICITY UNITS ARE REQUIRED , ETC., AND THE DECISION OF HONBLE CE&S TRIBUNAL AND THE PUNE BENCH OF THE TRI BUNAL IN THE CASE OF SRJ PEETY STEELS PVT. LTD. (SUPRA) ETC. NOTHING INCRI MINATING MATERIAL HAS BEEN BROUGHT BY THE REVENUE AUTHORITIES TO TAKE A CONTRA RY VIEW AGAINST THE FINDINGS OF CIT(A). WE THEREFORE FIND THE ORDER OF THE CIT(A) TO BE A REASONED ONE AND ACCORDINGLY AFFIRM THE SAME. THEREFORE, TH E GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 29. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 30. TO SUM UP, REVENUES APPEAL IN ITA NO.990/PUN/2 015 IS DISMISSED AS ABOVE AND ITA NO.991PUN/2015 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF OCTOBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 18 TH OCTOBER, 2017. ITA NOS.990 & 991/PUN/2015 BHAGYALAXMI STEEL ALLOYS PVT. LTD., 17 / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) - 1, AURANGABAD CIT - 1, AURANGABAD , , B BENCH PUNE; / GUARD FILE.