9911796707
TMI Blog2014 (10) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08, the assessee also started the processing of choker for producing superfine choker/bran which had been sold for 6,03,38,004/- during the year - the assessee has processed 1,86,207.04 quintals of choker for production of superfine choker/bran which process also uses diesel - The AO has not considered the consumption of diesel for the purpose of manufacturing of superfine choker/bran by processing of 1.86 lakh quintals of choker - as per expert advice for production of better quality of choker etc., the assessee needed load of 625 KVA against existing load of 385 KVA but despite application and efforts by the assessee, load was not increased during the year - the assessee got connection of 625 KVA on 26.05.2009 beyond the period of financial year under consideration. The assessee maintains proper records to show the purchase and consumption of diesel for its business purpose which justifies the increase of consumption of diesel during the year – the AO has formed opinion for disallowance on incorrect and incomplete facts and also by ignoring and not considering other important evidence submitted by the assessee to support its claim - CIT(A) has granted relief for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng arguments of the assessee without giving any reason. 4. Whether in the facts and circumstances of the case, the Ld. C.I.T. (Appeals) was justified in granting relief without appreciating the comparative figures supplied by the assessee itself of earlier years where the consumption of Power and fuel was 4.02%, and 7.92% in assessment years 2005-06 and 2006-07 respectively and 74.97% for assessment year under consideration. 5. In the facts and circumstances of the case, the order of the Ld. Commissioner of Income Tax (Appeals) may be set-aside and that of the A.O. restored." 3. Brief facts giving rise to this appeal are that the assessee filed its return through e-filing declaring an income of ₹ 13,58,626 and the case was selected for scrutiny. Consequently, a notice u/s 143(2) of the Income Tax Act, 1961 (for short the Act) and another notice u/s 142(1) of the Act were duly served on the assessee. During the assessment proceedings, from the comparative charts of sales and gross profit with manufacturing details furnished by the assessee, it was found that there was a noticeable sharp increase in the consumption of power and fuel, mainly diesel as compared to the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively. One boiler to produce to steam for washing of wheat was also installed on 17.01.2006 wherein diesel was the consumed separately. The consumption of HSD also increased due to interruption of Electric supply. To summarize the capacity of generators their fuel consumption in generators and boilers are as under:- Generators Capacity Consumption of HSD per hour in Ltrs Normal Days Normal working hours Normal Consumption of Diesel (Ltrs) (i) 380 KVA 105 Ltrs 300 24 756000 (ii) 160 KVA 60 Ltrs 300 24 432000 (iii)125 KVA 40 Ltrs 300 24 288000 (iv) 2 Boilers 61 Ltrs 300 24 439200 Total 1915200 As per chart indicated above total consumption of diesel work out of 1915200 Ltrs whereas total diesel consumed 1903045 Ltrs Nil Purchased Less - Wastage 12300 Closing 10655 22955 1903045 Bills of all purchase of Diesel and Electricity are vouched and their payments were made through cheque/drafts. The Figures indicated in your notice are not correct as the consumption of power and fuel were calculated vis a vis the value of wheat consumed whereas the power and fuel is related with crushing of wheat. Secondly, the process of crushing of wheat has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased has been furnished which is hand written having no complete address of the seller is placed on records. Further there is no evidence as to how much diesel may be consumed in these generator's or boilers. The theory has been generated that this year superfine bran has been produced out of the general bran and further claimed that 66,207.04 Quintals of superfine bran was sold for ₹ 6,03,38,004/- giving rate of RS.911.35/Quintal while atta has been sold at the rate of ₹ 1,106.12/Quintal, suji at the rate of ₹ 1,288.30/Quintal and maida at the rate of ₹ 1,204.30/Quintal. One can hardly believe that this choker said to be superfine bran would have been sold at the rate of RS.911.35/Quintal, while the choker produced was sold at the rate of ₹ 653.44/Quintal. All this choker/superfine bran has been sold on cash basis and therefore figures of sale price are not reliable. All this theory has been made to prove the quantity of diesel consumed. 2. Comparative chart of manufacturing expenses and other expenses has been furnished show that expenses on wages and salaries this year amounting to RS.7,24,490/- and in the preceding year ₹ 6,61,280/-wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steam washing of the wheat was also done. The assessee has shown 19,03,045Ltrs consumption of diesel while the consumption of diesel above has been worked out to be 6,85,705.25Ltrs to be fair and just and hence 12,17,340Ltrs of excess diesel shown to have been consumed. Just one cannot digest someone saying that he has prepared one kg of pudding by using 100kgs of sugar or 100kgs of rice or 100kgs of milk, in the same way after going through the consumption of diesel and quantity of wheat crushed diesel to the extent shown to have been consumed is not believable. Therefore I hold that assessee has claimed excess consumption of diesel to the tune of 12,17,340Ltrs valuing ₹ 3,59,35,876/- (12,17,340Ltrs x ₹ 29.52=Rs.3,59,35,876/-). Accordingly the same is disallowed and added to the income returned by the assessee." 6. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) which was allowed by observing that the assessee has purchased bills which confirm the purchase of diesel under supervision of various petroleum authorities and the supplies made to the assessee's tanker under the earth and, therefore, there was a zero possibility to sell the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961. On a perusal of the totality of facts, certain undisputed and certain disputed points emerge which could be summarized as under: 6.7.1. Undisputed points: i. That the assessee has maintained complete book of account including bills, vouchers, stock register and log book and Wages Register and produced before the A.O. ii. That the A.O. has given proper and reasonable opportunity of being heard and A.O. has passed the order after making all the possible enquiry. iii. That as per assessment order and remand report the A.O. has not pointed out any defect in the books of account. iv. That without any doubt the assessee has made purchase of diesel from M/s Bharat Petroleum Corp. Ltd. for a sum of ₹ 5,68,58,808/-, and the total sale amounts to ₹ 36,70,60,940/-. The A.O. and S.T.O. have not made any dispute about the sale, purchase, opening stock and closing stock. v. That the G.P. rate of the year under consideration shot up from 2.28 to 3.03%. vi. That in the previous year electricity load was only 380 KVA and the assessee made application to correct the load of 625 KV A as per expert's opinion. vii. That the assessee submitted that due to poor quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with finality the state of affairs reflected by the books of accounts. 6. That the assessee has cited a number of cases in support of his claim. However, the A.O. has not made any comments on the case-laws referred to by the assessee. From the disputed facts, it is clear that the central dispute relates to the excess consumption of diesel. The main emphasis of the assessee was based upon expert's opinion to change the process which was based entirely on electricity to the process based on electricity and diesel generators sets. The assessee has maintained complete books of account, bills, voucher, stock register and log book of consumption of diesel. The assessee is also assessed to tax with Trade-tax Authorities and furnished all the necessary information as asked for by the AO from time-to-time. A remand report from the A.O. was obtained on the submission made by the assessee. The assessment records show that the assessee already had furnished necessary information as filed in the appeal proceedings except expert's opinion and the Sales-tax Officer's order. The books of account were produced at the time of hearing. The A.O. has made the assessment and disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has produced photocopy of the bills of M/s Bharat Petroleum Corp. Ltd., carrying Invoice No.1100 dated 20.07.2006. The bills clearly show that purchase of diesel undergoes supervision of various petroleum authorities and the supply is made to the assessee's tanker under the earth. Therefore, there is zero possibility to sell the diesel in the open market. The A.O. in his order and the remand report has not indicated any sale of diesel in the open market. Therefore, there is no doubt that diesel purchased by the assessee was consumed for the production of Aata, Suji & Maida. The assessee has shown log book related to consumption of diesel. This log book maintained by the assessee shows daily stock of diesel and details of consumption of oil for different purposes. The log book is regularly monitored by District Authorities, Sales-tax Authorities and this record was also countersigned by the authorities giving their signatures and seals. A copy of the log book was produced. The A.O. has not made any comments on it. The consumption of diesel, therefore, was justified vis-a-vis the log book. When it is monitored by District Authorities & Sales-tax Authorities, the consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Similarly, the assessee also relied on following I.T.A.T. Judgments: (i) CIT Vs. Girnar Construction Co. [2003] 129-Taxman-691 (Raj.) (ii) Rakesh Kumar Jayanti Lal Gupta Vs. Assistant Commissioner of Income-tax, 55-ITD-97 The AR also relied on I.T.A.T. order in ITA No. 835/Del/09 for the A.Y. 2001-02 Hon'ble I.T.AT. 'D' Bench Delhi in the case of Ankit Glass Pvt. Ltd. Vs. AC.I.T., Circle-I, Meerut, vide his order dated 15-01-2010 in which it was held as under: "We are the view that no addition on account of unexplained credit deserves to be made in the hand of the assessee because sales have been accepted by the Sales-tax Department as well as Central Excise. The assessee has produced the alleged middleman through whom these amounts have been collected and goods were supplied. It is not a simple case of taking loan or unexplained money routed by the assessee through different names. The Ld. CIT(A) though pointed out certain circumstances giving rise to suspicion but those are not strong enough to charge the assessee with tax on these amounts. In view of the above discussion, the addition made by the Ld. Commissioner is not sustainable and we direct the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be beyond the log book. Copies of Log book and Trade-tax order of the year were produced. 5. The case-laws cited by the assessee were not considered by the A.O., which are fully applicable to the facts of the case. Considering the facts of the case, written submissions of the AR, documents filed by the assessee during the assessment proceeding, appellate proceedings and the case-laws, it is held that the A.O. was not justified in disallowing the consumption of diesel. However, it is seen that the assessee is also having a diesel car and the possibility of personal use of the same cannot be ruled out. Hence, addition of ₹ 3,59,35,876/- is reduced by ₹ 1,20,000/- (10,000 x 12) treating the use of diesel for personal use to that extent. (Relief 3,59,35,876 - 1,20,000 = 3,58,15,876/-). 7. In the result, the appeal is partly allowed." 8. Now, the aggrieved revenue is before this Tribunal in this second appeal with the grounds as mentioned hereinabove. 9. As per findings of the Commissioner of Income Tax(A), we observe that the Commissioner of Income Tax(A) granted relief to the assessee and restricted the disallowance and addition only upto ₹ 1,20,000 by holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel submitted that the assessee explained excessive consumption of diesel with cogent and reliable explanation. The counsel of the assessee further submitted that the assessee was facing problems in electricity supply and assessee also wanted to improve the quality of its production, therefore, the assessee was compelled to install two generators and two boilers during the year under consideration. The counsel has also drawn our attention that the assessee used excessive quantity of diesel to improve the quality of its products and for manufacturing of super fine choker from ordinary choker and for this purpose, the assessee has to install six body chakki round the year in addition to above mentioned generators and boilers. The counsel also pointed out that there was a sharp decrease in the supply of electricity and on the other hand, the assessee installed additional generator boilers and other equipments with the intention to improve the quality and to fill the deficit of electricity supplied during the year, therefore, the excessive consumption of diesel was fully justified by the assessee and the Commissioner of Income Tax(A) rightly accepted the explanation of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and which was also checked by District Authority. 15. As per submissions and contentions of the DR, the Commissioner of Income Tax(A) granted relief to the assessee by ignoring and not considering some material facts. On the other hand, the main contention of the assessee is that the Assessing Officer has ignored this very fact that there was a substantial increase in the GP rate of the assessee during the year under consideration in comparison to the immediate preceding year. Ld. counsel of the assessee submitted comparative chart of five years from AY 2004-05 to 2008-09 showing quantity of processed wheat, quantity of processed choker, amount of total sale proceed and gross profit to show that the GP was higher in comparison to earlier and subsequent years during the impugned year of assessment. The counsel of the assessee has also submitted a chart showing unit of electricity consumed, amount paid and other facts and remarks for AY 2005-06 to AY 2009-10. The assessee has also furnished another chart showing quantity of diesel consumed from AY 2005-06 to AY 2009-10 which also show amount paid for purchase of diesel and the facts pertaining to the quality of manufactured goods an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 3,59,35,876 has been disallowed out of diesel expenses claimed by the assessee amounting to ₹ 5,65,53,895/-. 18. As per impugned order, the Commissioner of Income Tax(A) allowed the claim of the assessee by deleting whole addition except ₹ 1,20,000 on the ground of personal use of diesel in the car owned by the assessee. From the assessment order, we clearly observe that the AO has made disallowance presuming that the consumption of raw material was 1,07,049.45 quintals which was of wheat only. The Assessing Officer ignored a very important fact that the assessee was not doing only processing of wheat for manufacturing of atta, suji and maida upto AY 2006-07 but during the year under consideration i.e. AY 2007-08, the assessee also started the processing of choker for producing superfine choker/bran which had been sold for ₹ 6,03,38,004/- during the year. Thus, we clearly observe that the assessee has processed 1,86,207.04 quintals of choker for production of superfine choker/bran which process also uses diesel. The Assessing Officer has not considered the consumption of diesel for the purpose of manufacturing of superfine choker/bran by processing of 1.86 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by proper purchase invoices issued by IOC and BPCL and the Assessing Officer has not disputed the amount of purchase and invoices/bills raised by the seller petroleum companies. Obviously, the purchase of bills is always regulated under supervision of various petroleum authorities and district supply officers and supply of diesel was made to the assessee's tanker kept under the earth and supply of the diesel was made through tankers of the seller petroleum companies up to underground tankers of the assessee company. The Assessing Officer has not brought any material on record to show that the diesel has been sold in the open market or has been used for any other purpose. From the impugned order and submissions of the assessee, we also observe that the assessee maintains log book of the diesel which shows supply and consumption of diesel and log book is verified and signed by the District civil supply authorities. This log book is a vital evidence for verification of the claim of the assessee pertaining to the consumption of diesel during the year. The Assessing Officer has not pointed out any discrepancy in the log book maintained by the Assessing Officer and the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining to excessive consumption of diesel. During the arguments, both the parties have not disputed this legal proposition that any evidence which has not been verified at the end of the Assessing Officer, the same should be verified at the end of the Assessing Officer for proper and just adjudication of the issue. 23. In view of above discussion, we are of the considered opinion that the Assessing Officer made disallowance and addition by ignoring substantial facts and, on the other hand, the Commissioner of Income Tax(A) granted relief to the assessee by taking a theoretical approach without giving proper observation and finding to the factual matrix and details and submissions of the asssesee. Thus, we find it proper to restore the issue to the file of Assessing Officer with a direction that the Assessing Officer shall verify the correctness of the claim of the assessee pertaining to the diesel consumption after considering all the facts, details and evidence which support the claim of the assessee with regard to diesel consumed during the year. Needless to say, the Assessing Officer shall afford due opportunity of hearing for the assessee during fresh adjudication on the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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