ITO, SIRHIND vs. SH. VINOD KUMAR SHARDA, MANDI GOBINDGARH

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the Revenue against the order dated 09.12.2016 of the Commissioner of Income Tax (Appeals), Patiala [hereinafter referred to as CIT(A)].

In the facts and circumstances of the case the ld CIT(A) has erred in deleting the addition made by the Assessing officer on account of unaccounted investment and unaccounted profit out of unaccounted production .

2 ITA No. 394/Chd/2017- Sh. Vinod Kumar Sharda, Mandi Gobindgarh

assessee company runs a Steel Manufacturing Unit. 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. The Assessing officer further 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 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.

3 ITA No. 394/Chd/2017- Sh. Vinod Kumar Sharda, Mandi Gobindgarh

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 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

4 ITA No. 394/Chd/2017- Sh. Vinod Kumar Sharda, Mandi Gobindgarh

book results should be accepted. Accordingly, its book results were

accepted for the assessment year 2013-14. It was, therefore, pleaded that

its book results for the 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 by the assessee which included the assessee as

well, hence, he following the principle of consistency laid down by the

Hon'ble Punjab & Haryana High Court in the case of CIT Vs. RIETA

Biscuits Co. (P) Ltd [2009] 309 ITR 154 (P&H) 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.

5 ITA No. 394/Chd/2017- Sh. Vinod Kumar Sharda, Mandi Gobindgarh

come in appeal before us.

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

of the Ld. AR. The issue is squarely covered by the above referred to

decisions of the Tribunal wherein whiling 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. 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

6 ITA No. 394/Chd/2017- Sh. Vinod Kumar Sharda, Mandi Gobindgarh

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.”

cases referred to above. In view of the above, we do not find any infirmity

in the order of CIT(A) and, accordingly we uphold same. The appeal of the

Revenue is hereby dismissed.

10 In the result, the appeal of the Revenue is hereby dismissed.

Order pronounced in the Open Court.

Sd/- Sd/- (Dr. B.R.R. KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 04.06.2018 Rkk

Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR