M/S PUNJAB TISSUE LTD.,CHANDIGARH vs. ITO-WARD-2(3), CHANDIGARH

per record that there was no electricity connection with the

assessee and there was one Security Guard available by the

name of Shri Ramvachan who stated that since 2012,

manufacturing activities had not taken place and that he was

living in the factory premises for the last four years using a

small generator. Record shows that summons were issued u/s

131 on 22.02.2016 requiring Shri Rachhram Singh (another

Security Guard) and Shri Ramvachan. The Security Guards

were required to appear before the AO for recording of

statements on 25.02.2016. Shri Rachhram as per record

submitted that he was working as Security Guard for the last

ITA-16-2020 A.Y. 2013-14 Page 3 of 8

two years. As per record, information u/s 133(6) was also

called forth from Executive Engineer, Punjab State Power

Corporation Ltd., Kurali but no reply was received.

Accordingly, after show causing the assessee and considering

the reply, addition of Rs.24,05,249/- was made. The assessee

challenged this addition before the First Appellate Authority

who also confirmed the addition. Aggrieved, the assessee is in

appeal before the ITAT.

the year under consideration is 2013-14 assessment year i.e.

2012-13 Financial Year and the statements are being recorded

in February,2016. Referring to the record, it was submitted

that one Security Guard has been at the premises for two years

and another Security Guard who is there for almost four years

has also stated that the business was not functioning. These

statements, it was submitted, record the facts as on 2016 and

do not prove that in the year under consideration the business

was not functioning. It was submitted that the business had

been functioning, however, for want of orders for

manufacturing of Gray Board in the year under consideration,

the assessee went out of business. Inviting attention to the

submissions advanced before the AO extracted in the order, it

ITA-16-2020 A.Y. 2013-14 Page 4 of 8

was submitted that the assessee had vide his letter dated

30.01.2016 submitted that the business had not been closed

and there was only a temporary lull in the business as a

technical person had left. The electricity payments were as per

the minimum charges of electricity. It has also been submitted

that from its various sundry debtors the assessee has managed

to recover Rs.8 lacs, hence it was argued that all possible

efforts were made to keep the business functioning.

3.1 Inviting attention to the Paper Book filed, it was

submitted that various other business related expenses have

been allowed by the AO. Attention was invited to pages 28 to

39 which contains copies of bills raised by the Punjab State

Power Corporation wherein the payments for the specific bills

supported by the receipts were also available. It was his

submission that merely because the Punjab State Power

Corporation does not reply even to the AO, this fault cannot be

laid at the doors of the assessee. The expenses were genuine

and incurred for business.

3.2 Inviting attention to the Paper Book 40, it was submitted

that when the Show Cause Notice issued by the AO is seen, it

can be seen that the AO was considering disallowing

ITA-16-2020 A.Y. 2013-14 Page 5 of 8

depreciation amounting to Rs.21,69,409/- on Plant &

Machinery and miscellaneous factory assets alongwith

electricity expenses. However, considering the business to be a

going concern only Power and Fuel Expenses paid to State

Electricity Corporation has been disallowed. It was his

submission that apart from this business, there was nothing

else with the assessee and there is no reason set out as to why

the electricity expenses paid to a Government authority

evidenced by Receipt on record for the Bills also on record has

been disallowed. Accordingly, it was his prayer that the appeal

of the assessee may be allowed.

3.3. In order to highlight the high handedness of the

Authority, attention was invited to the impugned order, specific

attention was invited to the fact that the assessee had

specifically canvassed that statements of the two Security

Guards had not been confronted to the assessee, despite that

an incorrect fact is recorded in the order. Reference again was

is made to Show Cause Notice dated 25.02.2016 which is at

page 40 of the Paper Book which would show that no statement

of any person was confronted. Accordingly, it was his prayer

that even otherwise, the impugned order has many

shortcomings. Since specific redressal for these shortcomings

ITA-16-2020 A.Y. 2013-14 Page 6 of 8

is not prayed for, the submission it was submitted, is only

illustrative of how the assessee has been treated.

Specific emphasis was laid on the fact that the assessee had no

opening or closing stock and no inventory. Hence, it was

submitted, the business had infact closed. Accordingly, it was

his submission that the electricity expenses were rightly

disallowed.

material available on record. We find that in the facts of the

present case, the fact that it was an ongoing business

undergoing a lull has been accepted by the AO himself as

various other business expenses have been allowed. It is

further seen that the aforesaid payments in terms of the bills

raised by the Punjab State Electricity Corporation is an

evidence of third party evidence which cannot be easily

discounted as a self created evidence. The payments have been

made is also not in dispute. We further find that statements of

two Security Guards in February,2016 in regard to the factual

position of the assessee's business functioning in the year

under consideration i.e. 2012-13 assessment year does not

have much relevance. The fact that it has not been confronted

ITA-16-2020 A.Y. 2013-14 Page 7 of 8

to the assessee is also a fact evident on the face of the record.

We further find that merely because the Punjab State

Electricity Corporation, even to the AO, has failed to respond

and provide information u/s 133(6) is a fact for which the

remedy lies with the Revenue. The assessee has no role to play

and cannot be held to be answerable for the lapses of the

Corporation. Considering the submissions of the assessee

consistently on record wherein it is evident that the assessee

tried to keep his business alive and viable and ultimately had

to close down, expenses so disallowed in the facts of the

present case cannot be sustained. Addition made is directed to

be deleted. Said order was pronounced in the Open Court at

the time of hearing itself.

Order pronounced in the Open Court on 15 t h

December,2022.

Sd/- Sd/-

(VIKRAM SINGH YADAV) (DIVA SINGH) लेखा सद�य सद�य/ Accountant Member �याियक �याियक सद�य सद�य/ Judicial Member लेखा लेखा लेखा सद�य सद�य �याियक �याियक सद�य सद�य “Poonam”

ITA-16-2020 A.Y. 2013-14 Page 8 of 8

आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar