2017 (11) TMI 1926 - 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 -The issue is squarely covered by the above referred to decision of the Tribunal in the case of ITO vs Shri Harpreet Singh 2017 (8) TMI 1621 - ITAT CHANDIGARH wherein, while dismissing the identical appeals of the Revenue held 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 AO have also followed this norm while making assessment in similar type of cases and have accepted the book results shown by the assesses. No 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 made on estimation basis - Decided in favour of assessee.

Summary

Issues Involved:
Assessment of unaccounted production leading to unaccounted sales and purchases, rejection of books of accounts under section 145(3) of the Income-tax Act, 1961, appeal before CIT(A) challenging the Assessing officer's order, acceptance of book results based on a committee report, consistency in assessment approach, appeal by Revenue against CIT(A) order, comparison with similar cases before the Tribunal.

Assessment of Unaccounted Production:
The case involved the assessment of unaccounted production by an assessee firm engaged in the manufacturing of iron & steel goods. The Assessing officer observed discrepancies in the consumption of electricity vis-a-vis production of finished goods, leading to suspicions of unaccounted production. The Assessing officer rejected the books of accounts under section 145(3) of the Income-tax Act, 1961, and estimated unaccounted income, adding it to the assessee's income.

Appeal Before CIT(A):
The assessee firm, aggrieved by the Assessing officer's order, filed an appeal before the CIT(A). The assessee presented detailed submissions and highlighted a subsequent study by a Committee that set a 15% deviation limit for electricity consumption. The CIT(A) considered the committee's report and held that the Assessing officer's rejection of the books of accounts was not justified. The CIT(A) directed the Assessing officer to accept the book results and deleted the additions made on an estimation basis.

Acceptance of Book Results:
The CIT(A) relied on the committee's report and the principle of consistency in assessment. The CIT(A) noted that the Assessing officer had accepted similar book results in subsequent years based on the committee's guidelines. The CIT(A) emphasized that lower electricity consumption could indicate higher production and income, which should be viewed positively. The CIT(A) upheld the assessee's book results for the year under consideration, following the principle of consistency.

Tribunal's Decision:
The Revenue appealed against the CIT(A)'s order, challenging the acceptance of book results. The Tribunal considered similar cases and upheld the CIT(A)'s decision, emphasizing the 15% deviation limit set by the committee. The Tribunal noted that the CIT(A) had correctly interpreted the lower consumption as indicative of higher production and income, supporting the acceptance of book results. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order.

In conclusion, the Tribunal upheld the CIT(A)'s decision to accept the assessee's book results, considering the committee's report and the principle of consistency in assessment. The case highlighted the importance of interpreting lower electricity consumption positively and indicated that deviations within acceptable limits should not lead to adverse inferences. The Tribunal's dismissal of the Revenue's appeal reinforced the acceptance of the book results based on the committee's guidelines and previous assessment practices.