2013 (4) TMI 112 - HC - Income Tax

Rejection of books of accounts invoking section 145 of the Act - Addition on account of suppression of production - Section 44AB of the Act - Held that - - We find that the findings of fact recorded by the authorities below are quite reasonable and neither can it be said to be vitiated by any error of law nor can it be branded as perverse findings justifying interference in this appeal preferred under section 260A of the Act. CIT Appeals held that the assessee maintained the books of accounts which were audited under the Companies Act and also under section 44AB of the Act The Tribunal took into consideration the contention of the assessee that variation in consumption of electricity might be caused due to various reasons such as break down of machinery, quality of raw materials, thickness of finished goods and frequency of power failure etc. and such facts could not be controverted by the Assessing Officer. The Tribunal further observed that the argument of the assessee was rather accepted by the Assessing Officer to the extent of 30%, for which no basis could be cited. - Decided against the revenue.

Summary

Issues:
1. Rejection of books of account under section 145 of the Income Tax Act, 1961.
2. Deletion of addition made on account of suppression of production.

Analysis:
1. The first issue revolves around the rejection of books of account under section 145 of the Income Tax Act, 1961. The Assessing Officer rejected the books of accounts of a Private Limited Company engaged in the business of manufacturing M.S. and C.T.D. Bars due to a significant variation between production and electricity consumption. However, the Commissioner of Income Tax [Appeals] held that the rejection was unjustified as the books were audited under the Companies Act and section 44AB of the Income Tax Act. The appellate Commissioner noted the absence of material evidence indicating unaccounted manufacturing or sales by the company. Additionally, the excise authorities had verified the production records without finding any discrepancies, leading to the deletion of the addition by the Commissioner of Income Tax [Appeals].

2. The second issue pertains to the deletion of an addition made on account of suppression of production. The Assessing Officer calculated a suppressed production value based on electricity consumption and production figures provided by the company. Despite accounting for potential discrepancies in electricity consumption, the Assessing Officer made an addition to the company's income. On appeal, both the Commissioner of Income Tax [Appeals] and the Tribunal upheld the company's argument that variations in electricity consumption could be attributed to factors like machinery breakdowns, raw material quality, and power failures. The Tribunal specifically noted that the Assessing Officer accepted a 30% variation without a basis. Ultimately, the High Court found no substantial question of law in the appeal, as the findings of the lower authorities were deemed reasonable and not vitiated by errors or perversity, leading to the summary dismissal of the appeal under section 260A of the Income Tax Act, 1961.