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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 11.10.2018 of the Ld. Commissioner of Income Tax, Patiala [hereinafter referred to as ‘CIT(A)’].
Following grounds have been raised by the Revenue in this appeal :- 1. In the facts and circumstances of the case, the Ld. CIT(A) is correct in deleting the addition made by the Assessing officer on account of unaccounted investment and unaccounted profit out of unaccounted production even when the variation of consumption of electricity was more
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 2 than 15%. More so, this action of the Ld. CIT(A) is uncalled for being contrary to the observations of different courts that every year is an independent assessment year.
It is prayed that the order of Ld. CIT(A) be set aside and that of Assessing officer restored.
The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.
The brief facts relating to the issue under consideration are that
the assessee company is engaged in manufacturing of Steel products.
During the assessment proceedings, the Assessing officer asked the
assessee to furnish details of daily production of finished goods as well
as the details of the manufacturing process involved. On examination of
the details, the Assessing officer 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 vis-à-vis production
shown, the Assessing officer gathered information regarding the
consumption of electricity from the Electricity Board. The Assessing
officer analyzed the consumption data of electricity vis-a vis the
production of finished goods and observed that there 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 whereas finished
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 3 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,
electric 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 some days though there was electricity consumption yet no
production was shown. He further noted that otherwise on other days,
there was also a balance and 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 relating to the daily production had not been maintained as per
actual production. When confronted in this respect, the assessee
explained that the consumption of electricity was dependent on various
factors as detailed in his reply which has been reproduced by the
Assessing officer in the assessment order. The Assessing officer,
however, was not satisfied with the above reply of the assessee. He
ultimately held that the assessee company was involved in unaccounted
production of finished goods which resulted in unaccounted sales and
purchases. He, therefore, held that the sale and purchase figures in the
books of account of the assessee were not correct and he accordingly
rejected the books of accounts of the assessee by invoking the
provisions of section 145(3) of the Income-tax Act, 1961 (in short 'the
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 4 Act') and proceeded to frame the assessment in the manner as provided
u/s 144 of the Act. He thereafter worked out the unaccounted income of
the assessee on account of unaccounted production and added the same
to the income of the assessee.
Being aggrieved from the above order of the Assessing officer the
assessee preferred appeal before the CIT(A).
Before Ld. CIT(A), the assessee filed detailed submissions. It was
also brought into the knowledge of the CIT(A) that 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 (National Institute of the Secondary Steel
Technology) and also the industry representatives. 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.
That pursuant to the report of the Committee, the Assessing Officers
have followed this norm while making assessment in similar cases and
has accepted the book results if the variation is within 15% window. It
was, therefore, pleaded that the book results of the assessee for the
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 5 assessment year 2012-13 should also be accepted and consequently, the
addition should be deleted. The Ld. CIT(A) got verified from the
Assessing officer the above contentions of the assessee which was
reported to be correct by the Assessing officer. The Ld. CIT(A)
thereafter held that once an issue has been decided on merits in a
subsequent year, it would not be appropriate 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 decided by the Committee, the assessee was
entitled to benefit of 15% variation in consumption of electricity per
metric ton of finished goods produced from the average worked out on
yearly basis and the variation up to 15% would not warrant any adverse
cognizance. He accordingly 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
has accepted the books results shown in other cases, hence, following
the principle of consistency, he held that the books results shown by the
assessee company for the year under consideration need to be accepted,
as well. He therefore, set aside the action of the Assessing officer in
rejecting the books of account and directed the Assessing officer to
accept the book results shown by the assessee and deleted the additions
so made by the Assessing officer on estimation basis.
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 6 6. Being aggrieved by the above order of the CIT(A), the Revenue
has come in appeal before us.
At the outset, the Ld. AR of the assessee has submitted that the
issue is squarely covered in favour of the assessee by the various
decisions of the Tribunal in this respect and has relied upon the
following recent decisions:- i) ITO Vs. Amar Ispat Udyog ITA No. 384/Chd/2017 order dated 26.10.2017
ii) ITO Vs. Prem Steel & Allied Industries ITA No. 672/Chd/2017 dated 10.11.2017
iii) ITO vs Shri Harpreet Singh order dated 1.8.2017 - ITA No. 912/Chd/2017 (Chandigarh Bench)
We have heard the rival contentions. We find force in the
contention of the Ld. AR. The issue is squarely covered by the above
referred to decision of the Tribunal in the case of ‘ITO vs Shri Harpreet
Singh’(supra), wherein, while dismissing the identical appeals of the
Revenue, the Tribunal has observed as under:-
“7. ………. the Ld. CIT(A) while deciding the above appeals in favour of the assessee has already followed the internal guidelines of the committee constituted by the Principal Commissioner of Income Tax, Patiala. That the Committee so constituted was a Broad based Multi Member body having 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 of the Secondary Steel Technology (NISST) and the Industry representatives.
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 7 The Ld. CIT(A) has accepted the variation of 15% in consumption of electricity per metric ton of finished goods as per the report of the Committee. He has also observed that pursuant to the report of committee, the Assessing officers have also followed this norm while making assessment in similar type of cases and have accepted the book results shown by the assesses. Considering the above facts and circumstances, we do not find any infirmity in the order of the CIT(A) while directing the Assessing officer to accept the books results shown by the assessee for this year also and 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, therefore, upheld.”
The facts and issue involved in the present appeal are identical to that in the cases referred to above. In view of the above, we do not find any infirmity in the orders of CIT(A) and, accordingly we uphold same.
In the result, the appeal of the Revenue is hereby dismissed. Order pronounced in the Open Court on 06.08.2019.
Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 06 .08.2019 “आर.के.” आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File
ITA No. 44-cv-2018- M/s Baba Balak Nath Steel Pvt.,Ltd, Gobindgarh 8
आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar