JCIT (OSD), CHENNAI vs. BLUE METALS COMPANY PVT LTD., CHENNAI

The order of the learned CIT(A) is contrary to law, facts and circumstances of the case.

We have heard both sides, perused the materials on record and gone through the orders of authorities below. The assessee had filed its return of income of Rs.1,88,761/-. The Assessing Officer completed the assessment by determining the total income of the assessee at Rs.1,12,05,020/- by rejecting the books of accounts on the ground that the electric power consumed by the assessee is not proportionate to the production and on the basis of report submitted to the bank for obtaining bank loan. In appeal, the ld. CIT(Appeals), by calling remand report from the Assessing Officer and also reply from the assessee, gave a categorical finding that the Assessing Officer has not found out any defect in the profit and loss account and the balance sheet submitted by the assessee. He has also observed that the turnover of the assessee was certified by the Sales Tax assessment order issued by the Sales Tax Department. Further, the ld. CIT(Appeals) has observed that the assessee has given a technical and decisive factors for electrical consumption. The electrical charges are totally verifiable by way of electricity bills issued by the Tamil Nadu Electricity Board [TNEB] and the sales of the assessee are also verifiable. By taking into consideration of the above factors and also various case law relied on by the assessee, the ld. CIT(Appeals) has held that the Assessing Officer was not justified in invoking the provisions of section 145(3) rejecting the books of accounts and estimating the turnover and income on the basis of project report submitted for obtaining bank loan.

In so far as the report submitted to the bank for obtaining loan is concerned, the Coordinate Bench of the Tribunal in for the assessment year 2002-03 in the case of ACIT v. Shri Shaikh Usman Ali vide order dated 27.11.2013 has followed the order of the another Coordinate Bench in I.T.A. No. 2013/Mds/2005 decided on 27.07.2007, wherein the Tribunal has observed as under:

Considering the present case on the prism of aforesaid, in our opinion, there was no cogent material before the Assessing Officer to conclude that the stock statement submitted to bank was sacrosanct and actual representative of assessee's stock. In this view of the matter, we delete the addition on account of suppression of stock. Since the addition on account of suppression of stock has been deleted, the question of addition of Gross Profit thereon does not arise. In the background of aforesaid discussion and precedents, we decide both the issues raised in favour of the assessee and against the Revenue.”

By following the above decision of the Tribunal, we are of the opinion that based on the report submitted by the assessee to the bank for obtaining loan cannot be a basis for making the addition.

In the case of CIT v. Sakuntala Devi Khetan (supra), the Hon’ble Jurisdictional High Court has observed that where the sales tax return was filed by the assessee to the Commercial Tax Department and accepted by them, the Assessing Officer has no jurisdiction to go beyond the closing stock declared by the assessee and accepted by the Commercial Tax Department. In the present case, the ld. CIT(Appeals) has given a categorical finding that the turnover of the assessee was certified by the Sales Tax assessment order issued by the Sales Tax Department. Therefore, once the Sales Tax Department has accepted the turnover of the assessee, the Assessing Officer has no jurisdiction to go beyond the value of the closing stock as declared by the assessee and accepted by the Sales Tax Department by following the same ratio on the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Sakuntala Devi Khetan (supra).

So far as consumption of electricity is concerned, in the case of CIT v. Sulabh Marbles (P) Ltd., the Hon’ble Rajasthan High Court has held that in the absence of any defect in assessee’s books of account, the same could not be rejected merely on the basis of the quantum of electricity expenses shown by the assessee.

Keeping in view of the specific findings given by the ld. CIT(Appeals), following the decisions of the Hon’ble Jurisdictional High Court as well as Hon’ble Rajasthan High Court and also by following the decision of the Coordinate Bench of the Tribunal, we find no reason to interfere with the order of the ld. CIT(Appeals). Accordingly, the grounds raised by the Revenue are dismissed.

For the assessment year 2009-2010 also, the Revenue has raised similar ground except change of figures on same set of identical facts and circumstances. Accordingly, for the assessment year under consideration also, we find that the ld. CIT(Appeals) was fully justified in deleting the addition made by the Assessing Officer. Therefore, the appeal filed by the Revenue for the assessment year 2009-10 is dismissed.