Income Tax Appellate Tribunal - Chandigarh
Dcit, Circle, Parwanoo vs M/S Shree Siddi Vinayak Forging Pvt. ... on 31 October, 2018
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी" , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH "B", CHANDIGARH
ी संजय गग , या यक सद य एवं डा. बी.आर.आर, कुमार, लेखा सद य
BEFORE: Sh. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM
आयकर अपील सं./ ITA NO. 797/Chd/2018
नधा रण वष / Assessment Year : 2014-15
The DCIT बनाम M/s Shree Siddi Vinayak
Circle, Sector-2 forging Pvt.Ltd.
Parwanoo, Himachal Pradesh Vill: Pargana Plassi
Himachal Pradesh
थायी लेखा सं./PAN NO: AAICS8788C
अपीलाथ /Appellant यथ /Respondent
नधा रती क! ओर से/Assessee by : Shri. A.K. Tewary
Shri. S.C. Gupta
Shri. Naresh Kumar Gupta
राज व क! ओर से/ Revenue by : Smt. Renu Amitabh
सन
ु वाई क! तार&ख/Date of Hearing : 22/10/2018
उदघोषणा क! तार&ख/Date of Pronouncement : 31/10/2018
आदे श/Order
PER DR. B.R.R. KUMAR, A.M
The present appeal has been filed by the Revenue against the order of the Ld. CIT(A), Shimla, H.P. dt. 27/03/2018.
2. In the present appeal Revenue has raised the following grounds:
1. On the facts and in the circumstances, the Ld. CIT(A) has erred in deleting the addition of Rs. 4,38,79,792/- made by the Assessing Officer on account of unaccounted investment for production of finished goods after rejecting the books of accounts of the assessee under section 143(3) of the Income Tax Act,1961 .
2.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 16,67,346/- made by the A.O. on account of unaccounted profits out of unaccounted production of finished products.
3. Ground 1 & 2 are being taken up together.
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4. The brief fac ts relating to the issues under consideration are that the assessee company is a steel Re-Rolling Mill engaged in manufacturing of iron and Steel Products viz Structural Steel like angles, channels, flats, joists, beams etc. 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. I n 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 observed that the electricity consumption pm t of finished goods varies from in a range as per the chart submitted before the Assessing Officer as well as the CI T(A). 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 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 produc tion of finished goods. He, therefore, observed that it indicated that the daily production recorded by the assessee of the finished goods was not correc t and, hence, not reliable. He observed that the data relating to the daily production had 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 ul timately 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 correc t and he accordingly rejected the books of account 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 estimated the income of the assessee on the basis of electric units consumed for 12 months as per chart reproduced in the assessment order. He compared the same with that shown in the books of account of the assessee and estimated the unaccounted production for each month. Thereafter, on the basis of average sales rate, the value of total unaccounted production was estimated in monetary terms and then adopting the 4 gross profit rate shown by the assessee, the unaccounted profit ou t of the unaccounted produc tion was worked out. Secondly, the peak unaccounted production for the relevant month was determined and by multiplying the average sale rate of finished goods, the unaccounted investment was worked out. The Assessing officer in this way worked out the total unaccounted investment of the assessee in the unaccounted production at Rs.4,38,79,792/- and Rs. 16,67,346/- being unaccounted profit out of unaccounted production and added back the same to the total income of the assessee.
5. Being aggrieved from the above order of the Assessing officer the assessee preferred appeal before the CI T(A). The Ld. CI T(A) deleted the addition based on the developments took place subsequent to the passing of the above stated impugned assessment order, a detailed study was carried ou t by a Committee headed by the Additional Commissioner of I ncome Tax, Range, Mandi, Gobindgarh having all the Assessing officers of the Range as its members. The committee was assis ted by the experts from the NI SST (National I nstitute of the Secondary Steel Technology) and also the indus try 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.
6. Ld. Counsel for the Assessee, relying upon the report of the Committee constitu ted by the Principal Commissioner of I ncome Tax, Patiala argued that he was covered on the issue of production as 5 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.
7. This Tribunal vide its common order dated 14.2.2017, passed in the case of M/s Modi Oil & General Mill, Mandi Gobindgrh and Others in I TA No. 149/Chd/2016 and in I TA No. 662/Chd/2016in the case of M/s.Unipearl Alloys, observing that consequent to the report of the Committee constitu ted by the Principal Commissioner of Income Tax, Patiala certain internal guidelines regarding acceptability of variation upto 15% have been issued and further that no additions have been made on similar issue in subsequent years by the Assessing officer, has remanded the matter to the Assessing officer with a direc tion to decide the issue afresh in accordance with law in the light of the internal guidelines issued by the Principal Commissioner of I ncome Tax, Patiala.
8. In the instant case, the Ld. CI T(A) after examining in detail the table after considering variation of 7.24% for different m onths, examined the finished goods produced, calculating the difference in production in MT and also the difference in produc tion in percentage categorically held that the assessee falls within the accepted range of variation and therefore no interference with the book result is warranted. I t was also held by the Ld. CI T(A) that since the ground relating to unaccounted production stands allowed the consequential addition made under unexplained investment would also be deemed to have been allowed.
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9. After hearing both the parties and going through the issues involved in the case, considering the facts and circumstances of the instant case and in view of our similar findings given by this Tribunal the cases mentioned above at Para 7, we hereby decline to interfere with the order of the Ld. CI T(A).
10. In the resul t, appeal of the Revenue is dismissed.
Order pronounced in the open Court.
Sd/- Sd/-
संजय गग डा. बी.आर.आर, कुमार,
(SANJAY GARG ) ( DR. B.R.R. KUMAR, AM)
या यक सद य/ Judicial Member लेखा सद य/ Accountant Member
AG
Date: 31/10/2018
आदे श क! त,ल-प अ.े-षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय/ ु त/ CIT
4. आयकर आय/ ु त (अपील)/ The CIT(A)
5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File