DCIT, SIRHIND vs. M/S SHAKTI STEEL ROLLING MILLS, MANDI GOBINDGARH

Per Sanjay Garg, Judicial Member:

The captioned appeals have been preferred by the Revenue

against the separate orders of the Commissioner of Income Tax

[hereinafter referred to as CIT(A)], Patiala dated 27.01.2017 &

09.1.2017 respectively.

ITA Nos. 477 & 478/Chd/2017- Sh. Samana Ispat Pvt Ltd & Shakti Steel Rolling Mills Mandi Gobindgarh 2 2. Since the identical issue is involved in both the appeals,

therefore, these have been heard together and are being disposed of

by this common order. The common grounds raised in both the

appeals read as under:-

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

ITA Nos. 477 & 478/Chd/2017- Sh. Samana Ispat Pvt Ltd & Shakti Steel Rolling Mills Mandi Gobindgarh 3 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. 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

ITA Nos. 477 & 478/Chd/2017- Sh. Samana Ispat Pvt Ltd & Shakti Steel Rolling Mills Mandi Gobindgarh 4 assessee on account of unaccounted production and added the same to

the income of the assessee.

the assessee preferred appeal before the CIT(A).

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

ITA Nos. 477 & 478/Chd/2017- Sh. Samana Ispat Pvt Ltd & Shakti Steel Rolling Mills Mandi Gobindgarh 5 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.

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

ITA Nos. 477 & 478/Chd/2017- Sh. Samana Ispat Pvt Ltd & Shakti Steel Rolling Mills Mandi Gobindgarh 6 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

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

ITA Nos. 477 & 478/Chd/2017- Sh. Samana Ispat Pvt Ltd & Shakti Steel Rolling Mills Mandi Gobindgarh 7 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.”

Sd/- Sd/- (B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 10.04.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR