Income Tax Appellate Tribunal - Lucknow
Mohan Steels Ltd., Unnao vs Assessee on 31 December, 2015
1
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "B", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.591/Lkw/2014
Assessment Year 2010-11
Dy. Commissioner of Income Tax-5, Vs M/s Mohan Steels Ltd.,
Kanpur Gazauli Industrial Area
Site No.1, Plot No.1,
Unnao- 209 801
PAN AAACM 9592 Q
(Appellant) (Respondent)
CO No. 41/Lko/2014
(In ITA No.591/Lkw/2014)
Assessment Year 2010-11
M/s Mohan Steels Ltd., Vs Dy. Commissioner of Income Tax-5,
Gazauli Industrial Area Kanpur
Site No.1, Plot No.1,
Unnao- 209 801
PAN AAACM 9592 Q
(Appellant) (Respondent)
Appellant by Shri Amit Nigam, DR
Respondent by Shri Rakesh Garg, Advocate
Date of hearing 19/11/2015
Date of pronouncement 31/12/2015
ORDER
PER SUNIL KUMAR YADAV, JM.
This appeal is preferred by the Revenue against the order of the Ld. CIT(A)- II, Kanpur. The assessee has also filed the cross objection. Since, the appeal and 2 the CO were heard together, these are being disposed of through this consolidated order. However, we will adjudicate them one after the other.
ITA No.591/LKW/20142. This appeal is preferred by the Revenue on the following grounds:
"1. That the Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the relief of Rs.44,35,531/- out of Power & Fuel without appreciating the merits of the case as well as facts and material brought on record by theAO.
2. That the Cornmissioner of Income Tax (Appeals) has erred in law and on facts in allowing the relief of Rs.44,35,531/- out of Power & Fuel without appreciating the fact that assessee failed to offer any explanation in respect of the huge variation in consumption of power and fuel per M.T. as compared to earlier year.
3. That the Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the relief of Rs.2,94,489/- on account of disallowance of depreciation on Car without appreciating the fact that the assessee failed to submit justification regarding the business expediency of the Car under reference with the assessee's business.
4. That the Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the relief of Rs.1,68,695/- out of Workmen Welfare Expenses without considering the fact that most of these expenses were incurred in cash and in absence of proper verification, the same are not open for verification.
5. That the order of Commissioner of Income Tax (Appeals), being erroneous, unjust and bad in law be vacated and the order of Assessing officer be restored.
6. That the appellant craves leave to modify any of the grounds of Appeal given above and/or add any fresh ground as and when it is considered necessary to do so."
3. Apropos Ground nos. 1 and 2, it is noticed that during the course of assessment proceeding, the Assessing Officer has noted that the assessee has shown excess consumption of power at the rate of 1.97 unit per metric tonne of production, excess consumption of furnace oil at the rate of 6.59 kg per metric 3 tonne of production and lesser consumption of steam coal at the rate of 23.67 kg per metric tonne of production. Having noticed that substantial variation in power and fuel consumption in two consecutive years, which is not possible for the same set of plant and machinery, the Assessing Officer has observed that the assessee has exaggerated the consumption of power and fuel and he accordingly worked out the average rate of purchase of furnace oil and coal, resulting into addition of Rs.44,35,531/-.
4. Aggrieved, the assessee has preferred an appeal before the CIT(A) with the submission that the assessee company is manufacturing TMT bars mainly on job work basis for SAIL. The assessee has installed reheating furnace in its manufacturing unit and the billets supplied by the SAIL are treated in the reheating furnace to an even temperature of 1120 degree Celsius. The reheating furnace is a pusher type furnace which is operated on furnace oil as well as on coal gas. The capacity of the furnace is 40 M.T. per hour. It was further contended that the furnace is fully operated on the furnace oil, then the minimum and maximum consumption of furnace oil is 800 ltrs. per hour and 1600 ltrs. per hour respectively, depending on the capacity utilization. It was further explained that if furnace is run idle, the minimum fuel consumption will be 800 Ltrs. per hour and if it is 100% capacity utilization, the consumption will be 1600 Ltrs. per hour. Similar is the position with consumption of coal. A furnace is fully operated on coal, the minimum and maximum consumption of coal per hour comes to 2000 kgs. and 5000 kgs respectively. Coal is used an alternate fuel, because running of furnace on coal is not cost effective. The assessee has furnished the table giving details of the capacity utilization, power and fuel consumption. Being convinced with the explanation of the assessee, the CIT(A) deleted the addition.
5. Aggrieved, the Revenue is in appeal before the Tribunal with the submission that the plant and machinery of the SAIL remains the same, then why there is substantial variation in power and fuel consumption in two consecutive years. Ld. 4 DR invited our attention to the chart furnished by the assessee with the submission that the stand taken by the assessee is not in conformity with the chart produced by it. As per the chart, whenever capacity utilization was more, the consumption of power was also increased and these facts are contrary to the stand taken by the assessee. Ld. DR further contended that first time, the assessee has filed this chart along with explanation which was never confronted to the Assessing Officer. Moreover on technical issue, the CIT(A) should have called an expert opinion. It was further contended that even if the contention of the assessee is accepted then why there is a fluctuation in consumption of power and fuel in two consecutive years. It should have been remained the same. Ld. counsel for the assessee on the other hand has placed strong reliance upon the order of the CIT(A). It was further contended that the assessee has furnished the detailed explanation before the CIT(A) and moreover the Assessing Officer is not a technical expert to find out the defect in the consumption of power and fuel. If he had any doubt, he should have called the comments either from the assessee or from an expert. But, he did not do so, whereas the CIT(A) has properly examined the issue.
6. Having carefully examined the orders of the lower authorities, in the light of rival submissions, we find that the Assessing Officer has noted substantial variation in consumption of power and fuel. In the light of these facts, the contention of the assessee that he had used particular type of machine, cannot be accepted as the plant and machinery of the assessee remained the same in both the consecutive years. The consumption of power and fuel per metric tonne should remain the same or with the minor fluctuation. But, there cannot be substantial variation in consumption of power and fuel per metric tonne. We have also carefully examined the table extracted by the CIT(A) in his order and we find that the stand taken by the assessee that whenever the capacity utilization is more, consumption is less is not in conformity with the details given in the table.
56.1 In the light of these facts, we are of the view that the issue was not properly examined by the CIT(A). We, therefore, set aside his order and restore the matter to his file with the direction to adjudicate the issue afresh after obtaining proper report from the technical expert in this field, as the Assessing Officer and the CIT(A) cannot be called to be technical expert in this field. Accordingly, the order of the CIT(A) is set aside in this regard and matter is restored back to his file with the direction to readjudicate it afresh after affording opportunity of being heard to the assessee. So far as Ground nos. 3 and 4 of the appeal and sole ground in CO are concerned, we find that disallowances were made on adhoc basis having noted that there were incurred for non business purpose. Whereas, the assessee is limited company and there is no evidence that the expenses incurred for non business purpose. Accordingly, we find no merit in this ground of the Revenue.
7. In the result, appeal of the Revenue is partly allowed for statistical purposes and the Cross Objection of the assessee is allowed.
(Order was pronounced in the open court on the date mentioned on the caption page) Sd/- Sd/-
(A.K. GARODIA ) (SUNIL KUMAR YADAV)
Accountant Member Judicial Member
Dated: 31/12/2015
Aks
Copy of the order forwarded to :
1.The Appellant
2.The Respondent.
3.Concerned CIT
4.The CIT(A)
5.D.R., I.T.A.T., Lucknow Asstt. Registrar