2014 (3) TMI 1003 - AT - Income Tax

Addition on account of suppressed job work receipts - rejection of books of accounts - Held that - The Hon ble Andhra Pradesh High Court in the case of N. Raja Pullaiah v. Dy. CTO, (1969 (2) TMI 22 - ANDHRA PRADESH High Court ) and Kerala High Court in the case of St. Teresa s Oil Mills v. State of Kerala, reported in (1969 (11) TMI 9 - KERALA High Court ) has also held that books of account cannot be rejected, on the ground of consumption of electricity being abnormally high vis- -vis the units of production. In the impugned orders, the Assessing Officer and the ld. CIT(A) in substance rejected the audited books of accounts of the assessee on the basis of consumption of high electricity vis- -vis the production therefrom. No other defects in the books of accounts are pointed out by the Assessing Officer in the assessment order. No cross-verification in this regard was made by the Assessing Officer from the person whose job work is done by the assessee. With regard to consumption of electricity in the month of September 2005, it is true that there was no job work but consumption of electricity in that month is meager only which is due to the fact that the assessee s office is also situated in the factory building. Even when repair of machinery is being carried out, there will be consumption of electricity without any production. Considering all these factors, we are of the view that no case is made out for rejecting the books of accounts and for sustaining the addition as proposed by the Assessing Officer in the assessment order; we, therefore, delete the addition made in the assessment order. - Decided in favour of assessee.

Summary

Issues:
- Alleged suppressed job work receipts
- Disallowance of machinery renovation/repairs expenses and building repairs expenses

Alleged suppressed job work receipts:
The appeal by the assessee was against the order of the ld. CIT(A) for the Assessment Year 2006-07. The Assessing Officer noticed irregularities in job works and concluded that there was uneven job work causing the suppression of job work. The Assessing Officer added the value of suppressed job work to the total income of the assessee. The ld. CIT(A) confirmed this addition but deleted the disallowed expenses. The assessee contended that there were no suppressed job work receipts ever earned or found by the Revenue. The variation in electricity consumption was explained to depend on various factors affecting production. The books of accounts were audited, and no defects were pointed out. The variation in electricity consumption was deemed marginal and not abnormal, supported by case laws. The Assessing Officer's rejection of books solely based on electricity consumption variation was challenged. The Tribunal held that wide disparity in electricity consumption alone does not justify rejecting books without supporting material. The addition of suppressed job work receipts was deleted as no case was made out for rejecting the books of accounts.

Disallowance of machinery renovation/repairs expenses and building repairs expenses:
The Assessing Officer disallowed the machinery renovation/repairs expenses and building repairs expenses. The ld. CIT(A) deleted this disallowance. The assessee argued that the disallowance was made on doubt and suspicion and deserved to be deleted. The Tribunal considered the arguments and decided to allow the appeal of the assessee, deleting the addition made by the Assessing Officer.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the addition of suppressed job work receipts and disallowance of expenses made by the Assessing Officer. The decision was based on the lack of justification for rejecting the books of accounts solely on electricity consumption variation and the absence of defects pointed out in the books of accounts.