BS RANA vs. COMMISSIONER OF IT

This appeal was admitted by this Court vide order dated 4.5.2006 for determination of the following substantial question of law:- “Whether the order of the Tribunal is perverse whereby addition of Rs.2,73,000/- made on account of excess consumption of furnace oil has been upheld without there being any material?”

Put shortly, the facts of the case as pleaded in the appeal are that the assessee is carrying on the business of manufacturing and selling malleable iron pipe fittings. On 24.8.1993, a survey was conducted under Section 133A of the Income Tax Act, 1961 (in short “the Act”) at the business premises of the assessee and the financial year was divided by the Assessing Officer into two parts, i.e pre-survey -2- period from 1.4.1993 to 23.8.1993 nearly five months and the post- survey period from 21.8.1993 to 31.3.1994 nearly seven months. The assessee also surrendered income of Rs.3,25,000/- on account of excess stock and the Assessing Officer made additions of Rs.1,49,590/- on account of bogus purchases and Rs.2,73,000/- on account of excess consumption of furnace oil. Against the aforesaid additions made by the Assessing Officer, the assessee took the matter in appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 23.12.1997 upheld the view of the Assessing Officer. On further appeal by the assessee before the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”), the Tribunal vide order dated 19.1.2005 affirmed the orders of the CIT (A) as well as the Assessing Officer. Hence, the present appeal by the assessee.

We have heard learned counsel for the parties.

The solitary point that needs determination by this Court is whether the authorities below had rightly made addition of Rs.2,73,000/- in the income of the assessee on account of excess consumption of furnace oil which was not disclosed in the books of account of the assessee.

The Tribunal while concurring with the view of the Assessing Officer and the CIT(A) upholding the addition of Rs.2,73,000/- had recorded as under:- “The next ground of the assessee's appeal relates to sustaining of an addition of Rs.273000/- made on account of excessive consumption of furnace oil. The facts of the case are that the AO observed that -3- prior to survey, the assessee was purchasing only 12 M.T. of furnace oil every month. However, the AO observed that after the survey, purchases of furnace oil increased from 24 M.T. to 36 M.T. In all the assessees purchases were to the tune of 144.8 M.T. in the post survey period. The assessee was confronted with these facts and asked to furnish the details of opening stock of the furnace oil. However, the assessee gave a vague reply without explaining the reasons for substantial increase in purchases of pre-survey period and also failed to furnish the details of opening stock of the furnace oil. The AO also compared the case of the assessee with that of M/s New Metal Works and found that purchases of coal and fuel worth Rs.160022/- has been shown by that concern for total sales of Rs.8030571/-. As against the same, the assessee has shown purchases of Rs.1225394/- for making total sales of Rs.8591274/-. He also referred to the A.Y. 1993-94 and found that M/s New Metal Works has shown total purchases of Rs.210291/- for making sales of Rs.8654501/-. Thus, he observed that the assessee has shown quantum jump in the purchases of the coal and fuel in the subsequent period. Taking into account, the opening stock found on the date of survey and purchases made during the survey period, the AO worked out the total quantity of purchases at 146200 Ltrs. after reducing the quantity of closing stock of 16700 Ltrs. Taking into account the average consumption of 12 M.T. of furnace oil per month in the pre-survey period, the AO worked out the excess quantity of consumption of fuel at 45500 kgs. Taking the rate at Rs.6/- per kg. the AO made an addition of Rs.273000/- being excess consumption of fuel oil.”

The aforesaid concurrent finding of fact recorded by the authorities below could not be shown to be perverse or erroneous in any manner by the learned counsel for the assessee except that an attempt was made by him for reappreciation of evidence which is not permissible. As noticed earlier, all the three authorities have concurrently come to the conclusion that in the stock of consumption of furnace oil in the pre-survey period as compared to post-survey period there was substantial difference and the assessee could not offer any satisfactory explanation for the said difference. Once that was so, the addition made by the Assessing Officer and sustained by the appellate authorities cannot be faulted.

In view of the above, the substantial question of law is answered against the assessee.

Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE October 14, 2010 (ADARSH KUMAR GOEL) gbs JUDGE