THE PRINCIPAL COMMISSIONER OF INCOME TAX-3 vs. M/S VIJAY STEELS

Facts

The appeal is filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year (AY) 2013-14. The ITAT had upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in deleting an addition of Rs. 1,79,12,777/- out of a total addition of Rs. 1,84,38,444/- made by the Assessing Officer (AO) on account of excess burning loss. The assessee, M/s Vijay Steels, is in the business of re-rolling steel, using iron and steel plates from the ship-breaking industry as raw material. The Revenue contended that the burning loss shown by the assessee, ranging from 7.64% to 10%, was excessively high given the nature of the business and electricity consumption.

Held

The High Court held that the Tribunal had not committed any error of law or fact in its findings. The Court noted that the matter was substantially on facts, and there was no significant question of law. The High Court observed that there were concurrent findings of fact recorded by two revenue authorities (CIT(A) and ITAT) against the Revenue. Therefore, the High Court was not inclined to disturb these findings. The ITAT, in its order, had relied on its co-ordinate bench's decision for AY 2010-12 and also appreciated the CIT(A)'s method of taking the GP ratio of AY 2014-15 (4.65%) as a standard to compute GP addition, which resulted in a deletion of Rs. 1,79,12,777/- and confirmation of an addition of Rs. 5,25,667/-. The appeal was dismissed.

Key Issues

1. Whether the Appellate Tribunal has erred in law and on facts in upholding the order of the CIT(A) and not appreciating the findings of the Assessing Officer while estimating the burning loss @2% of the total input of the raw material? (Question of law and fact, concerning the estimation of burning loss). Assessee's contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, it refers to the ITAT's reliance on its own order for AY 2010-12, where a coordinate bench confirmed the deletion of addition. The ITAT also noted the CIT(A)'s rational method of computing Gross Profit (GP) addition by taking the latest profitable AY 2014-15 as a standard GP ratio of 4.65%, leading to a reduced addition. Revenue's contentions: The Revenue argued that the burning loss shown by the assessee (7.64% to 10%) was on the higher side. The proposed question of law highlights the Revenue's disagreement with the Tribunal's decision to uphold the CIT(A)'s order and not appreciate the AO's findings regarding the burning loss estimation at 2% of raw material input.