M/S. CASTECH FOUNDRIES PVT. LTD.,,JUNAGADH vs. THE JOINT COMMISSIONER OF INCOME TAX, JUNAGADH RANGE-1,, JUNAGADH

The grounds raised in these appeals read as follow:

The ground no.3 raised in the Asst.Year 2009-10 has not been pressed for adjudication, and therefore, the same is accordingly dismissed. Now only effective common ground raised in both the appeals is disallowance of power expenses on the ground that the same was used for non-business purpose. For adjudication of this issue, we take the facts of the case from the Asst.Year 2009-10.

Briefly stated facts are that the assessee is a private limited company engaged in manufacturing of steels & alloy steel casting and wind electric power. For the Asst.Year 2009-10, the assessee has filed its return of income on 17.9.2009 declaring income at Rs.51,57,070/-. After processing the return under section 143(1) of the Act, the case was selected for scrutiny assessment by issuance of notice under section 143(2) of the Act. During the assessment

Aggrieved by the order of the AO, the assessee went in appeal before the ld.CIT(A). The ld.CIT(A) after considering the submissions of the assessee and order of the AO observed that the expenditure incurred on consumption of power was beyond the requirement of the assessee, however, the ld.AO has given due concession to the assessee by estimating reasonable expenditure in proportion to production/sales and material consumed during the previous year. Accordingly, the ld.CIT(A) confirmed the order of the AO and dismissed the appeal filed by the assessee.

Further aggrieved, the assessee is now before the Tribunal. Before us, the ld.counsel for the assessee while reiterating the submissions made before the Revenue authorities, also submitted that assessee is engaged in the manufacturing activities, which involved various process like molding, pattern making, melting, casting, finishing, inspection etc. Even in some process, moulding got damaged every time, till the final casting was made which process consumed more electronic power, energy and man powers. That apart, when the machinery used for manufacturing activities gets aged, consumption of electricity is bound to be more year after year because of normal wear and tear. These fundamental facts have not been considered by the lower authorities and made estimation of the expenditure on the basis of previous year’s expenditure, which is not justifiable in law. Further, the Revenue authorities have assumed that the consumption of power for non-

On the other hand, the ld.DR supported orders of the Revenue authorities. He further submitted that concurrent findings of the both the authorities are to be upheld, in view of the fact that the explanation offered by the assessee was not supported by any evidences.

We have given our thoughtful consideration to the facts of the present case and also gone through orders of the Revenue authorities. We find that the ld.AO has disallowed an estimated power expenses of Rs.45,39,000/- out of total expenses of Rs.1,80,98,554/- in proportion to sales of the previous year on the ground that expenses claimed was very high vis-à-vis similar expense claimed in the earlier years. The case of the assessee was that increase in power consumption bill was due to increase of power tariff by the electricity company, for which the assessee has no control. Besides that the assessee company is an engineering unit involved in the process of molding, pattern making, melting, casing, finishing etc. The assessee produces different types of products with different specifications as per the requirement of the customers, and each specification requires different types of process, and during the process, there are failures and rejection, which

As far as appeal of the assessee for the Asst.Year 2010-11 is concerned, the assessee had claimed power expenses of Rs.1,06,50,497/-. The ld.AO by applying the method adopted in the last year, restricted power expenses on prorate basis at Rs.55,78,111/-. The same was challenged before the ld.CIT(A). ld.CIT(A) however has given partial relief to the assessee on this issue by directing the AO to calculate power consumption expenditure in proportion to material consumed at 24.78% being percentage of material summed to electricity/fuel consumption in Asst.Year 2008-09 instead of sale ratio adopted by the AO. In this assessment year 2010-11, we do not find any material change in facts and circumstances of the case so as to warrant us to take a different the view, contrary to the view taken in the Asst.Year 2009- 10, more so when the reasons advanced by both the parties are on the same footing that of the previous year. Therefore, following our

So far as ground regarding levy of interest under section 234B & 234D are concerned, the same consequential in nature. The ground regarding initiation of penalty under section 271(1)(c) of the Act is concerned, the same is premature at this stage. Therefore, both these grounds are accordingly disposed off.

In the result, both appeals of the assessee are partly allowed. Order pronounced in the Court on 22nd June, 2022 at Ahmedabad.