ITO, W-2, MANDI GOBINDGARH vs. M/S RUBY STRIPS PVT. LTD., MANDI GOBINDGARH

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee

against the order dated 21/06/2017 of the Commissioner of

Income Tax (Appeals), Patiala [hereinafter referred to as

CIT(A)].

ITA No.1276/Chd/2017- M/s Ruby Strips Pvt Ltd., Chandigarh 2

observations of different courts that every year is an independent assessment year.

the assessee company is engaged in manufacturing of Iron & Steel

products viz Flats & Bars . 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

ITA No.1276/Chd/2017- M/s Ruby Strips Pvt Ltd., Chandigarh 3

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 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.

the assessee preferred appeal before the CIT(A).

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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. 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

ITA No.1276/Chd/2017- M/s Ruby Strips Pvt Ltd., Chandigarh 5

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.

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

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

referred to decisions of the Tribunal wherein whiling dismissing the

ITA No.1276/Chd/2017- M/s Ruby Strips Pvt Ltd., Chandigarh 6

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 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.”

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

Revenue is hereby dismissed.

Order pronounced in the Open Court.

Sd/- Sd/-

(ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 11.05.2018 Rkk

ITA No.1276/Chd/2017- M/s Ruby Strips Pvt Ltd., Chandigarh 7

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR