2017 (8) TMI 1621 - AT - Income Tax

Unaccounted investment and unaccounted profit out of unaccounted production - variation of consumption of electricity was more than 15% - Rejection of books of accounts - HELD THAT - In identical issues, wherein the additions made by the AO on estimation basis as discussed above were upheld by the concerned CIT(A), the assessee preferred appeals before this Tribunal and this Tribunal vide its common order dated 14.2.2017, passed in a bunch of about 85 appeals in the case of M/s Modi Oil General Mill, Mandi Gobindgrh 2017 (2) TMI 1319 - ITAT CHANDIGARH while observing that consequent to the report of the Committee constituted by the Principal, Commissioner of Income Tax, Patiala some 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 AO has remanded the matter to the Assessing officer with a direction to decide the issue afresh in accordance with law in the light of the internal guidelines issued by the Principal, Commissioner of Income Tax, Patiala. In our view this matter need not to be restored in the present appeals as 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. 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 additions made by the Assessing officer on account of unaccounted profits / unaccounted investment - Decided against revenue.

Summary

Issues:
Assessment based on electricity consumption and production data.

Analysis:
The appeal was filed by the Revenue against the CIT(A)'s order. The Assessing officer observed discrepancies in the daily production records of finished goods by the assessee firm, relating to the consumption of electricity. The Assessing officer concluded that unaccounted production of finished goods led to unaccounted sales and purchases. Consequently, the books of accounts were rejected under section 145(3) of the Income-tax Act, 1961. The Assessing officer estimated the income based on the average consumption of electricity per metric ton of finished goods over 30 days, resulting in an addition of ?90,77,052.

The assessee appealed before the CIT(A) and provided detailed submissions. It was highlighted that a committee, after a detailed study, allowed a variation of 15% in electricity consumption per metric ton of finished goods based on yearly averages. The CIT(A) accepted this argument, citing the principle of consistency, and directed the Assessing officer to accept the books results and delete the additions made on estimation basis.

The Revenue appealed against the CIT(A)'s decision. The Tribunal noted that similar issues had been addressed in other cases where the matter was remanded to the Assessing officer for reconsideration based on internal guidelines. However, in this case, the Tribunal found no fault with the CIT(A)'s decision to accept the variation of 15% in electricity consumption per metric ton of finished goods. The Tribunal upheld the CIT(A)'s order to accept the books results shown by the assessee and dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the acceptance of the 15% variation in electricity consumption per metric ton of finished goods and directing the deletion of additions made by the Assessing officer. The appeal of the Revenue was dismissed.