ITO, W-2, MANDI GOBINDGARH vs. M/S RUBY STRIPS PVT. LTD., MANDI GOBINDGARH
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the CIT(A)'s decision to accept the assessee's book results. This was based on the principle of consistency and a committee report that allowed for a 15% variation in electricity consumption per metric ton of finished goods.
What were the facts?
The Assessing Officer rejected the assessee's books of account due to significant variations in electricity consumption versus reported production, suspecting unaccounted production and sales. The assessee argued that a subsequent committee report allowed for a 15% variation in electricity consumption.
What were the issues?
Whether the rejection of books of account was justified based on variations in electricity consumption versus production, and if a subsequent committee report allowing for a 15% variation should be applied.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(1)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. RIETA Biscuits Co. (P) Ltd.10 citing309 ITR 154 · 2009 · HC
Income Tax Appellate Tribunal, DIVISION BENCH, CHANDIGARH
Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA
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)].
The assessee has raised the following grounds:-
Whither on the facts and circumstances of the case, whether the Ld. CIT(A) was justified in deleting the addition made by the Assessing officer on account of unaccounted investment and unaccounted profit out of unaccounted production even when the variation of consumption of electricity was more than 15%. More so, this action of the Ld. CIT(A) is uncalled for being contrary to the
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.
It is prayed that the order of Ld. CIT(A) be set aside and that of Assessing officer restored.
The brief facts relating to the issue under consideration are that
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.
Being aggrieved from the above order of the Assessing officer
the assessee preferred appeal before the CIT(A).
ITA No.1276/Chd/2017- M/s Ruby Strips Pvt Ltd., Chandigarh 4
Before Ld. CIT(A), the assessee filed detailed submissions. It
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.
Being aggrieved by the above order of the CIT(A), the Revenue
has come in appeal before us.
At the outset, the Ld. AR of the assessee has submitted that the
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
We have heard the rival contentions. We find force in the
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.”
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.
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
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