ITO, W-2, MANDI GOBINDGARH vs. M/S BABA BALAK NATH STEELS PVT. LTD., MANDI GOBINDGARH

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)’].

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.

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.

assessee preferred appeal before the CIT(A).

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.

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)

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.”

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